Euro Slumps to 17-Month Low Against Dollar as French Debt Fears and Spain's Snap Election Rattle Markets
Single currency dips below $1.12 as French borrowing costs near 24-year highs and analysts warn of contagion
3 min read
File photo: The European Central Bank headquarters in Frankfurt, Germany. Photo: Norbert Nagel, CC BY-SA 4.0, via Wikimedia Commons
The euro has fallen to its lowest level against the US dollar in 17 months, as growing worries over France's public finances and a snap election in Spain revived memories of the eurozone debt crisis.
How far the euro fell
The single currency touched $1.1161 during Asian trading on Monday after four straight weekly losses, before standing at around $1.12 at the European open, Euronews reported. The Guardian said the euro fell as much as 0.8% to below $1.12, its lowest level since May 2025, extending a slide of about eight cents from a January peak of $1.20.
France's benchmark CAC 40 index fell about 1%, while other European markets were mixed.
France at the centre
Investors are focused on France's rising borrowing costs as the government struggles to control a large budget deficit ahead of next spring's presidential election. France's 10-year bond yield rose to 4.917% in early trading, close to last week's 24-year high, according to Euronews. The gap between French and German 10-year yields stood at about 146 basis points, after the largest weekly increase in 17 years, data provider LSEG said.
"Europe is taking the spotlight at the start of the week, as fiscal and political concerns hit the bloc," said Kathleen Brooks, research director at XTB. "France is the epicentre of the concerns; however, Spain is also set to get ready for an early election, which is adding to investor worries."
Spain adds to the uncertainty
Spanish Prime Minister Pedro Sánchez called a snap general election for November 29 on Monday, after parliament rejected two of his minority government's housing decrees. Spain's borrowing costs held steady, with its premium over German debt less than half of France's.
Fears of contagion
Analysts warned the stress could spread. Belgian bank KBC said there had been "clear contagion towards the likes of Belgium or Italy". Analysts at Dutch bank ING said the market could "easily add another 2% in risk premium to the euro" if the bond sell-off extended.
Roberto Mialich, a currency strategist at UniCredit, said: "Investors still do not rule out riding a further decline of the euro, making a retest of $1.10 possible in the near term."
A test for the ECB
The turmoil leaves the European Central Bank in a difficult position. It has raised interest rates twice since June to fight inflation, which hit 3.8% in September, Euronews reported.
ECB President Christine Lagarde told French daily La Croix last week that "when your debt is close to 120% of GDP and not on course to be brought under control, it's a serious matter". But she added: "it's not 2008 or 2011".
