Euro hits 17-month low
What's the story
The euro has plummeted to a 17-month low, amid fears over France's fiscal health and a major sell-off in its bond market. The currency fell as low as 1.1161 against the US dollar during Asian trading on Monday, its lowest since May 2025. This comes after four consecutive weeks of decline for the euro, which has been weighed down by concerns over France's debt burden and political gridlock ahead of next year's election.
Investor concerns
French government debt affected by surging oil prices
Investors are increasingly wary of France's political and fiscal outlook as the country grapples with rising borrowing costs and uncertainty ahead of the April 2027 elections.
The latest pressure on the euro comes after a global bond sell-off last week pushed borrowing costs to multi-decade highs.
French government debt was particularly affected as investors assessed how surging oil prices would affect inflation.
Currency fluctuations
US Treasury yields ease, dollar gains strength
The yield on 10-year US Treasury notes stood at 5.262%, easing after hitting a 24-year high last week and raising 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 US currency against six major currencies, rose by 0.47% to settle at an impressive high of 102.37 on Monday in Asia's trading session.
Market response
Carry trades and cyclical currencies at risk
Rising Treasury yields have made US assets more attractive, while a broader sell-off in global debt markets has pushed investors toward the safety of the dollar.
OCBC strategists warned that high rate volatility could continue to hurt carry trades, cyclical currencies and the euro, while traditional safe-haven currencies such as the Swiss franc and dollar could remain supported.
Rate hike outlook
US employment data slows down Fed tightening expectations
Expectations that the Federal Reserve could raise interest rates in coming months have been tempered by US employment data released on Friday.
The data showed job growth slowing more than expected in September, reducing near-term Fed tightening expectations.
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.