The euro weakened 0.8% to 1.1161 dollars in Asian morning trading, its lowest level since May 2025, before paring losses to 0.6% as of 2:00 p.m. Thailand time. The main driver was selling by hedge funds after reports that Spanish government officials were preparing to call an early election, which added pressure on the French bond market, while the spread between French and German government bond yields hit its highest level since 2011 last Friday. A group of traders said short-term-focused funds in Asia sold euros and bought dollars in the spot market, pushing the currency to a level that triggered further selling from options transactions. Analyst Homin Lee, a senior macro strategist at Lombard Odier Singapore, said the bond and money markets are clearly signaling that investors are worried about France's increasingly fragile government stability, as well as the country's deteriorating fiscal discipline ahead of the 2027 election, with opposition parties unwilling to compromise with President Emmanuel Macron's government. Meanwhile, Marine Le Pen of the far right and Jean-Luc Melenchon of the far left are likely to advance to the final round of the election, according to polls published last week.
Euro falls to 17-month low as hedge funds sell euros on Spanish early-election news and French political/fiscal worries.
