On Tuesday, the euro stayed close to a 17-month trough, weighed down by political uncertainty and fiscal worries throughout the euro area, as the dollar kept its rally, buoyed by rising U.S. Treasury yields.
The common currency inched down to $1.1219 in Asian trade, having slid to its lowest level since May 2025 in the previous session and extending its 1.2% fall from last week. It also lost more than 1% against the British pound, trading at 84.87 pence.
France’s high debt and political stalemate, combined with an upcoming snap election in Spain, are negatively impacting the euro. As French borrowing costs increase, this has a ripple effect across the euro area, causing concern among policymakers and contributing to the euro’s decline.
“We’re pretty pessimistic about the euro. We think it’s going to go down to under $1.10,” said Joseph Capurso, a strategist at Commonwealth Bank of Australia. Capurso noted the euro would need a significant decrease in oil prices, a big increase in expectations for European monetary policy tightening, or progress on reining in the budget deficit to reverse its decline. He added that for the euro to rise, you’d need them starting to get their act together on reining in the budget deficit, though he thinks there’s no chance of that happening anytime soon.
In the broader market, the dollar marched higher, drawing support from still-elevated US Treasury yields, which scaled multi-decade highs overnight. The dollar index firmed at 102.17, having scaled an 18-month high in the previous session. The greenback’s strength persisted despite reduced expectations for a Federal Reserve rate hike following weaker US jobs data, as investors bet the central bank would still need to tighten policy further.
The Bank of Japan may signal this month that underlying inflation has roughly hit its 2% target, three sources familiar with its thinking said, highlighting its readiness to raise interest rates again in the coming months. The dollar rose 0.18% to 158.16, while sterling slipped 0.06% to $1.3216.
The Australian dollar was little changed at $0.6971, while the New Zealand dollar eased 0.05% to $0.5597.
