Symbolic imageEuro hits 17-month low as French debt worries spread
The euro fell to its weakest level against the dollar since May 2025 on Monday. Concern over French public finances is now spilling into currency markets.
The euro dropped to 1.116 against the dollar on Monday, 5 October, according to Handelsblatt. Commerzbank analyst Thu Lan Nguyen said the worries had reached a currency that had been largely untouched by bond market turbulence, and were no longer confined to France. French 10-year yields neared 5 per cent on Friday before easing to 4.86 per cent, the FT reports. Banque de France governor Emmanuel Moulin warned that France risks being "gradually strangled by rising interest rates" without action.
Budget showdown in Paris
The government proposed a budget last week with €43bn in cuts and tax rises to narrow a deficit forecast at 5.4 per cent. Lacking a majority, it faces opposition over ending inflation-linked pension rises and partly freezing civil servants' pay, the FT reports.
Treasury yields above 5%
The FT reports that 10-year US yields rose from about 4 per cent in late February to above 5.2 per cent, as the Iran war, a strong US economy and heavy debt issuance fuel inflation fears.
Central banks weigh next steps
The ECB has raised rates twice in recent months and the Fed once in September; both decide again in late October. Moulin said it was not the time to discuss the ECB, and that higher long-term rates may reduce the need for further action by central banks.