The euro fell to a 17-month low against the dollar on Monday, as a sell-off in French debt sent a shudder through Eurozone markets already under pressure from higher oil prices. The euro weakened 0.6 per cent against the dollar to just below $1.12 during morning trading in London. It has fallen 1.2 per cent since the start of the month and is down almost 5 per cent against the US currency this year.
The move comes after a sell-off in French debt accelerated last week, driving yields on 10-year government bonds close to 5 per cent. Yields, which rise when prices fall, have risen more than 1.2 percentage points since the end of June. The euro's slide was 'driven by intensifying fears over the destabilising financial conditions in the Eurozone triggered by the sharp sell-off in French government bonds', said Lee Hardman, senior currency analyst at MUFG.
France has suffered particularly in the global bond sell-off as the march higher in yields has combined with worries over the government's failure to bring the country's deficit back down to within 5 per cent of GDP. It suffered further pressure on Monday, pushing the 10-year bond yield up 0.04 percentage points to 4.9 per cent, while yields fell 0.02 percentage points on haven German Bunds of the same maturity, continuing a flight to safety by investors. That took the closely watched France/Germany spread back close to 1.5 percentage points, levels not previously seen since the Eurozone debt crisis more than a decade ago.
Source: Financial Times Markets · Summarized by HeadlinesBriefing