Euro Struggles Near 17-Month Low Amid Political Uncertainty

The euro remained near its 17-month low on Tuesday, facing pressure from political uncertainty and fiscal concerns across the eurozone. In early Asian trading, the euro dipped slightly to US$1.1220, extending its 1.2% decline from the previous week. It also fell over 1% against the British pound. Worries about high debt levels and political gridlock in France, along with an upcoming snap election in Spain, have contributed to the currency's weakness.

Analysts remain pessimistic about the euro's prospects, with Joseph Capurso of Commonwealth Bank of Australia predicting it could drop below US$1.10. Capurso noted that significant improvements in oil prices, monetary policy expectations, or fiscal discipline would be needed for the euro to rebound. However, he expressed skepticism about any near-term improvements in those areas.

Meanwhile, the US dollar continued its rally, supported by elevated US Treasury yields. The dollar index rose to 102.16, reaching an 18-month high in the previous session. Despite weaker-than-expected US jobs data reducing expectations for a Federal Reserve rate hike, investors still anticipate further policy tightening due to persistent inflationary pressures.

Other currencies also faced declines, with the Australian dollar falling 0.07% to US$0.6967 and the New Zealand dollar easing 0.07% to US$0.5596. The dollar gained slightly against the yen, rising to 157.92, while sterling slipped 0.02% to US$1.3222.