Euro Hits 17-Month Low Amid Political and Fiscal Uncertainty
The euro remained weak on Tuesday, nearing a 17-month low due to political instability and fiscal concerns across the euro zone. The common currency dropped to $1.1219 in Asian trading, extending its 1.2% decline from the previous week. Against the British pound, the euro also lost over 1% last week, falling to 84.87 pence.
The euro's struggles stem from high debt levels in France and political uncertainty ahead of a snap election in Spain. Rising French borrowing costs are adding to broader economic concerns in the euro area. Joseph Capurso, a strategist at Commonwealth Bank of Australia, expressed pessimism, predicting the euro could fall below $1.10. He cited the need for lower oil prices, tighter European monetary policy, or fiscal discipline to reverse the trend, though he doubts the latter will happen soon.
Meanwhile, the US dollar continued its rally, supported by elevated Treasury yields, which hit multi-decade highs overnight. Sterling slipped 0.06% to $1.3216, and the dollar rose 0.18% against the yen to 158.16. The Bank of Japan may signal this month that underlying inflation has reached its 2% target, hinting at potential rate hikes in the coming months.
The dollar index strengthened to 102.17, nearing an 18-month high. Despite weaker-than-expected US jobs data, investors anticipate further Federal Reserve rate hikes due to persistent inflation pressures. Data on Monday showed slowing US services-sector activity, with strong domestic demand straining supply chains and pushing up input costs, suggesting inflation may remain high into next year.
The Australian dollar held steady at $0.6971, while the New Zealand dollar eased 0.05% to $0.5597.