Euro sinks to 17-month low on French debt crisis fears
The euro reached a 17-month low against the US dollar on Monday, October 5, 2026, driven by concerns over France’s budgetary deficit and a bond market sell-off. The yield gap between French bonds and safe-haven Bunds widened to 150 basis points on Friday, its highest since the 2011 eurozone sovereign debt crisis, before narrowing slightly. Commerzbank strategist Hauke Siemssen described the bond market dynamics as 'increasingly concerning' and 'somewhat reminiscent of a sovereign debt crisis.'
The euro fell to US$1.1161 in Asian trading, its weakest level since May 2025, and was last down 0.47 per cent at US$1.12. The single currency also dropped 1.8 per cent against the Swiss franc since October 1, reflecting fears of eurozone fiscal risk. ING forex strategist Francesco Pesole noted that the euro/Swiss franc pair is a historical hedge for this risk, but warned that the franc’s own fragilities could complicate this.
The dollar index rose 0.3 per cent to 102.23, approaching its highest level since April 2025, a time marked by President Donald Trump’s 'Liberation Day' tariff package. Traders now see an 80 per cent chance of the Federal Reserve holding rates steady in October, up from 36 per cent a week earlier, with more hikes expected in 2027.
The Japanese yen remained steady at 157.92, supported by government warnings against yen depreciation and its safe-haven status. Prime Minister Sanae Takaichi’s commitment to fiscal sustainability eased concerns about Japan’s fiscal outlook, while data showed accelerating core inflation in Tokyo, bolstering the case for further interest rate hikes.