The euro has collapsed against the dollar, suffering its worst fall ever in the wake of the UK’s vote to leave the EU.

The euro has slumped 3.3 per cent against the greenback to a three-month low of $1.1019, having earlier dropped as much as 4.2 per cent.

The 3.3 per cent decline is the worst since it fell 2.5 per cent in March 2001.

Deutsche Bank has slashed its euro forecast to $1.10 by the end of the year, down from $1.20 previously.

It warns that the impact of Brexit could force the ECB to remain dovish for longer:

With growth already fairly sluggish in the EU, further downward risks would suggest that the ECB would need to maintain its dovish policy for even longer. If contagion were to spread to peripheral bonds markets the ECB might need to accelerate the frontloading of its bond buying programme to keep yields contained. This would mean that the EUR would act as the main signal of stress.

Chart courtesy of Bloomberg

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