Euro falls to 17-month low as French debt concerns unsettle markets

The euro fell to a 17-month low against the U.S. dollar on Monday as investors focused on France’s strained public finances and heightened political uncertainty in Europe.

The currency dropped as much as 0.8% to below $1.12 before recovering slightly. It has declined about 5% since the start of 2026 and nearly 7% from its January peak. The dollar has also been supported by rising U.S. Treasury yields and expectations that Federal Reserve policy will remain tight.

French borrowing costs rose sharply last week, with the yield on 10-year government bonds approaching 5%, its highest level in more than two decades. The gap between French and German 10-year yields widened to levels last seen during the eurozone debt crisis, reflecting increased investor concern over France’s fiscal position.

France’s debt is close to 118% of gross domestic product, while its annual budget deficit remains above 5%. The government has proposed tens of billions of euros in spending reductions, but investors are concerned that political pressures before next year’s presidential election could impede efforts to reduce borrowing.

The announcement of a snap election in Spain added to political uncertainty. France’s CAC 40 index fell about 1% on Monday, while other major European markets were steadier. The euro’s losses against the Swiss franc and Japanese yen also indicated that its weakness was not solely the result of a stronger dollar.