Euro Hits 17-Month Low Amid Fiscal Instability in France and Bond Market Shakes

The value of the euro against the dollar has fallen to its lowest level since May of last year, driven by political and fiscal instability in major European countries such as France and a surge in energy prices.

According to Bloomberg and Reuters, in the Asian foreign exchange market on the 5th (local time), the euro fell by 0.8% from the previous session to as low as $1.1161, and is also trading at around $1.12, down 0.6%, in the London foreign exchange market.

This marks four consecutive weeks of decline against the dollar through last week, bringing its drop to nearly 5% so far this year.

Last week, the yield on 10-year French government bonds surged to 4.9%, and on the 2nd, the spread between 10-year French and German government bonds widened to 1.5 percentage points (p), the widest gap since 2011.

This indicates that investors prefer safer German government bonds over French bonds.

Large-scale protests protesting housing shortages in Spain have raised prospects for an early general election, which has further shaken the unstable French bond market amid uncertainties over the budget bill and concerns about fiscal stability ahead of next year's presidential election.

According to traders, short-term investors in Asian markets sold spot euros to buy dollars, which also led to option-related trading.

The market is wary of the possibility that the European bond market crisis could spread to a broader weakness in the eurozone.

The Financial Times (FT) reported that some market observers expect the European Central Bank (ECB) to take action to prevent France's debt problems from spreading to the wider eurozone.

Steve Robertson, Chief Strategist at Standard Chartered, pointed out, "European politics have truly begun to deteriorate," adding, "France appears to lack the will or ability to rein in its fiscal deficit, and high energy prices are driving up inflation at a time of sluggish growth, adding further pressure to the euro."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.