Euro Falls to 17-Month Low on France Debt Fears
The euro fell sharply on Monday to its lowest level in 17 months as concerns over France’s fiscal position intensified following a major sell-off in government bonds. The currency dropped as investors became increasingly concerned about France’s high debt levels and political uncertainty ahead of next year’s presidential election.
The euro fell as low as $1.1161 during Asian trading, its weakest level since May 2025, before recovering some of its losses. It was last down around 0.68% at $1.1176. The single currency also weakened against the Swiss franc and British pound.
France’s bond market adds pressure
The euro’s decline came after a sharp deterioration in France’s government bond market. The premium investors demand to hold French 10-year debt rather than German debt reached 140 basis points at the end of last week, after increasing 34 basis points during the week.
The widening spread has increased concerns that pressure in France could spread to other parts of the euro zone. Investors are watching whether the bond-market sell-off remains concentrated in France or develops into a broader European financial problem.
French bond futures remained close to recent record lows, while German Bund futures gained as investors sought relatively safer assets.
Dollar remains supported despite softer U.S. jobs data
The U.S. dollar continued to benefit from high Treasury yields and safe-haven demand. The dollar index was up around 0.47% at 102.37, while the U.S. 10-year Treasury yield remained close to elevated levels after reaching a 24-year high the previous week.
At the same time, softer U.S. employment data reduced expectations for an October Federal Reserve rate hike. Markets were pricing in a 78% probability that the Fed would leave rates unchanged this month, compared with 36% one week earlier.
The combination of high Treasury yields, global bond-market stress and concerns over France’s finances has therefore kept the dollar supported even as expectations for an immediate Fed rate increase have declined.
