The euro fell below $1.13 on Thursday, its lowest level in 17 months, as surging bond yields and rising inflation across the euro zone pushed investors out of European assets. Political uncertainty in France and Germany added to the pressure, while the dollar extended a six-quarter winning streak.
Euro breaks below $1.13
The euro fell 0.3% to $1.1299, slipping under $1.13 for the first time since May 2025. The currency also sank against the yen and the Swiss franc, and barely held in positive territory against the pound. It declined nearly 2.5% in September, its largest monthly drop since July 2025.
Yields on French debt surged to a 14-year high, as investors remained wary of France's shaky finances, and benchmark German debt came under pressure too. Europe also faces a hotly contested French election next year, along with mounting pressure on Germany's chancellor after a series of gains by the far-right AfD party in regional elections.
Inflation and yields drive the move
A surge in euro zone inflation underscored the threat that higher energy prices pose to the global economy. By contrast, data on Wednesday showed US inflation rose less than expected in August, with downward revisions to July's figure, which lowered expectations for a Federal Reserve rate hike this month.
According to Rabobank: "This growth risk has been hanging over the euro", said Jane Foley, the bank's head of FX strategy. She added that the currency has struggled for traction even as the ECB already raised rates and is expected to do so again, weighed down by long positions and concerns over Europe's reliance on energy imports.
Dollar extends its run
The dollar notched its sixth straight quarterly gain against a basket of currencies by the end of September, its longest such streak since 2022, helped by the largest quarterly rise in Treasury yields since 1994. The dollar index was last up 0.2% on the day, around its highest level since mid-May.
Sterling was down 0.2% at $1.3242 after sliding 2.1% last month, while the euro traded at its weakest point against the pound since late June, around 85.4 pence. The dollar also rose 0.54% against the yen to 158.29, reversing a 1.4% decline against the Japanese currency in September.
Source: Investing.com
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