Euro Nears 17-Month Low Amid Fiscal and Political Uncertainty

The euro remained near its lowest level in 17 months on Tuesday, as concerns over France's debt and political uncertainty across the eurozone continued to weigh on the currency. The euro traded at $1.1219 in Asian markets after falling 1.2% last week. Against the British pound, the euro was valued at 84.87 pence, having lost over 1% against sterling in the previous week.

French borrowing costs are rising, raising worries about their potential impact on the broader euro-area bond market. Political gridlock in France and an upcoming snap election in Spain have further added to the uncertainty. Joseph Capurso, a strategist at Commonwealth Bank of Australia, stated that the bank remains pessimistic on the euro, predicting it could fall below $1.10.

The US dollar continued to gain strength, supported by elevated US Treasury yields, which reached multi-decade highs. The dollar index rose to 102.17, near an 18-month high. Sterling slipped 0.06% to $1.3216, while the dollar gained 0.18% against the Japanese yen to 158.16.

Despite weaker-than-expected US employment data, investors still anticipate further monetary tightening due to persistent inflationary pressures. The US services-sector activity slowed in September, but strong domestic demand continues to strain supply chains and push up input prices. Meanwhile, the Bank of Japan may signal that underlying inflation has reached its 2% target, hinting at another interest rate hike in the coming months.