Euro Hits 17-Month Low Amid Eurozone Debt Crisis Fears
The euro hit a 17-month low against the dollar on Monday, falling to US$1.1161 in Asian trading, as concerns over France's budget deficit and a bond market sell-off raised fears of a return to sovereign debt crisis dynamics in the eurozone.
The yield gap between French government bonds and safe-haven German Bunds widened to 150 basis points last Friday, the highest since 2011, before narrowing slightly. Commerzbank strategist Hauke Siemssen described the bond market dynamics as 'increasingly concerning,' noting that the sell-off in French debt was fueling itself.
The euro's decline was exacerbated by political uncertainty ahead of France's 2027 election and a hung Parliament that has made it difficult to address fiscal issues. Planned budget cuts have sparked protests, further deepening the funding crisis in sectors like education.
The single currency also dropped 1.8% against the Swiss franc since last Thursday, with ING strategist Francesco Pesole suggesting further downside risks. Meanwhile, the dollar strengthened, approaching highs last seen before 'Liberation Day,' the term for President Donald Trump's tariff package in April 2025.
The Japanese yen remained steady at 157.92, supported by government warnings against its depreciation and its safe-haven status. Japan's Prime Minister Sanae Takaichi reassured investors about fiscal sustainability, easing concerns over rising bond yields.