The euro fell to its lowest level against the dollar since May 2025 on growing concerns about political instability and the state of public finances in the euro zone, Bloomberg reported. In Asian trading today, the single currency lost 0.8 percent to $ 1.1161 per euro, with hedge funds among the main sellers.
Reports that representatives of the Spanish government are preparing for early elections have increased investor concerns, which are already putting pressure on the French bond market. On Friday, the spread between French government bonds and comparable German bonds hit its highest level since 2011.
According to currency dealers who spoke on condition of anonymity, funds with short-term strategies in Asia sold euros for dollars in the spot market. The decline led to additional selling related to options.
“Bond and currency markets are clearly signaling investor unease about the growing instability of the French government and the erosion of the country's fiscal stability ahead of elections in 2027,“ said Homin Lee, senior macro strategist at Lombard Odier Singapore.
Investors are increasingly concerned about the political situation in France, where opposition parties have shown little willingness to compromise with the government before elections next year. According to a survey published last week, far-right candidate Marine Le Pen and far-left candidate Jean-Luc Mélenchon are expected to reach the second round.
Strategists at “JPMorgan“, including Mira Chandan, warned on Friday that the euro has not yet reflected the pressure on the French bond market and remains vulnerable to further sell-offs, especially against the Swiss franc and the yen. According to them, the exchange rate against the franc is too high and could continue to decline.
Today, the euro lost about 0.5 percent against the Swiss franc, marking a third consecutive trading session decline. Against the British pound, the single currency fell 0.26 percent to 0.850 pounds per euro.
The single currency is also under pressure from the appreciation of the dollar, supported by expectations of three more interest rate hikes by the Federal Reserve by July to control inflation. The Bloomberg Dollar Spot Index reached its highest level since late June on Monday.
“The dollar does not seem to have been affected by last Friday's weaker jobs report,“ said Fiona Lim, senior currency strategist at “Malayan Banking Berhad“. She said market attention had turned to the eurozone after a sharp increase last week in spreads on France's credit default swaps, which protect against default on its debt.
This has heightened interest in the state of public finances and other heavily indebted peripheral economies in the eurozone and further supported the dollar, Lim added.