The euro dropped as low as $1.1161 in Asian trading, its weakest level since May 2025, after posting four consecutive weekly declines, as per the report. Concerns over France’s debt burden and political gridlock ahead of next year’s election have weighed on the single currency.
Also Read | Global Market Today: Asian shares rise as Fed hike bets ease, oil gains
The euro was last down 0.67% at $1.1178. It also weakened 0.4% against the Swiss franc and 0.34% against sterling.
According to Reuters, investors have become increasingly concerned about France’s political and fiscal outlook as the country faces rising borrowing costs and uncertainty ahead of the April 2027 elections.
The latest pressure on the euro comes after a global bond selloff last week pushed borrowing costs to multi-decade highs. French government debt was particularly hard hit as investors assessed the inflationary impact of surging oil prices.
French bond futures fell 0.13% on Monday, remaining close to record lows reached in recent weeks.
Also Read | Nasdaq rises 1%, Dow, S&P close higher as weak jobs data tempers rate hike bets
The yield on 10-year U.S. Treasury notes stood at 5.262%, easing after rising to a 24-year high last week and triggering wider concerns across global financial markets.
Sterling slipped 0.24% to $1.32064, while the yen traded at 157.92 per dollar. The dollar index, which measures the U.S. currency against six major currencies, rose 0.47% to 102.37.
Reuters reported that rising Treasury yields have increased the appeal of U.S. assets, while the broader selloff in global debt markets has encouraged investors to seek the safety of the dollar.
OCBC strategists said elevated rate volatility could continue to weigh on carry trades, cyclical currencies and the euro, while traditional safe-haven currencies such as the Swiss franc and dollar could remain supported.
Fed rate path
Beyond concerns surrounding the euro, recent dollar strength has also reflected expectations that the Federal Reserve could raise interest rates in coming months.Those expectations were tempered by U.S. employment data released on Friday, which showed job growth slowing more than expected in September. The weaker labour market data reduced expectations for near-term Fed tightening.
According to Reuters, traders were pricing in a 78% probability that the Federal Reserve would leave interest rates unchanged in October, up from 36% a week earlier, based on CME FedWatch data.
Markets continue to expect a rate increase in December, followed by two more hikes in the first half of 2027.
However, analysts have questioned whether current market pricing is too aggressive.
Bank of Singapore chief macro strategist Mansoor Mohi-uddin said the latest jobs data indicated that the labour market was not overheating, despite inflation remaining above the Fed’s 2% target since the pandemic. He expects the central bank to leave rates unchanged this month.
Jefferies strategist Mohit Kumar expects only one rate increase from each of the Federal Reserve and the European Central Bank. He said central banks may ultimately deliver fewer hikes than currently priced in, either because oil prices fall or because persistently high energy costs weigh on economic growth, Reuters reported.
The diverging outlook for monetary policy, combined with elevated bond-market volatility and concerns over France’s fiscal position, is likely to keep currency markets volatile in the near term.
(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)
Add as a Reliable and Trusted News Source Add Now!
(You can now subscribe to our ETMarkets WhatsApp channel)