Sulseltimes.com, Jakarta, Selasa, 06/10/2026 — Euro dropped to its lowest level in 17 months versus the US dollar, driven by a sharp sell‑off of French government bonds that shook eurozone markets.
- Euro fell to a 17‑month low of about US$1.116 versus the dollar
- French 10‑year bond yields surged toward 5%
- Euro is down 4.5% year‑to‑date
- Markets now expect only two ECB rate hikes next year
- Political uncertainty in France and Spain added to pressure
Currency slides amid bond pressure
The single European currency weakened as much as 0.8% to US$1.116 in Monday trading in London, according to the Financial Times, before stabilising around US$1.121. The decline reflects broader concerns about fiscal stability in the eurozone, with France’s bond yields leading the turmoil.
French 10‑year government bond yields climbed to nearly 5% after a week of aggressive selling, the highest level since the start of the Iran conflict. The yield briefly rose earlier on Monday before settling at 4.86%, flat from the previous day. Since the Iran war began, French yields have risen the most among G7 nations, climbing from 3.2% at the end of February.
Political and fiscal headwinds
The pressure on French bonds is tied to doubts about Paris’s ability to cut its budget deficit below 5% of GDP. “The sell‑off reflects deepening worries about France’s fiscal position,” kata Lee Hardman, senior currency analyst di MUFG, Selasa, 06/10/2026. The turmoil has spread to other eurozone debt markets, especially Italy, prompting speculation that the European Central Bank may need to intervene.
Political risk is mounting ahead of next year’s French presidential election, where populist parties are gaining ground. Spain also announced a surprise election after a housing bill championed by Prime Minister Pedro Sánchez was rejected last week. “European politics are becoming increasingly fragmented, with France’s bond market at the centre of the storm,” kata Eric Robertsen, global head of research di Standard Chartered, Selasa, 06/10/2026.
Market expectations shift
Investors are scaling back expectations for ECB rate hikes. Markets now price only two 25‑basis‑point increases from the current 2.5% level over the next year, down from three hikes anticipated a few weeks ago. “Higher French yields are tightening financial conditions and will make further ECB tightening more difficult,” kata Jim Reid, strategist di Deutsche Bank, Selasa, 06/10/2026.
Broader currency impact
The euro’s weakness also spilled into the foreign‑exchange market, with the currency falling 1.6% against the Swiss franc to SFr0.932 this month, one of its sharpest monthly declines in years. Analysts say the move underscores the franc’s safe‑haven status. Some, however, caution against drawing direct parallels to the 2010‑2012 eurozone crisis. “The current situation is not a repeat of 2012,” kata Geoffrey Yu, senior strategist di BNY, noting that fundamentals differ.
The broader impact remains under watch. “Whether this marks the start of a new eurozone sovereign‑debt crisis or a market overreaction remains the key question,” kata Deutsche Bank’s Jim Reid. “For now, the evidence points more toward the latter.” The ECB and European policymakers are monitoring the developments closely.
