Euro falls to 17-month low amid political and fiscal instability in Europe

The euro dropped to its lowest level since May 2025 during Asian trading on October 5, 2026, falling by up to 0.8% to 1.1161 dollars. The decline is driven by mounting concerns over political stability and fiscal outlooks within the Eurozone, specifically reports suggesting the Spanish government may be preparing for early elections.

Simultaneously, the French bond market is under significant pressure. The yield spread between French and German government bonds reached its widest level since 2011 on the previous Friday. These factors have prompted hedge funds and short-term investors in Asia to engage in major liquidations of the common currency, further exacerbated by automated selling linked to options market positions.

While Philenews reports the euro hit 1.1161 dollars, Politis notes a current valuation of 1.1191 dollars, reflecting the volatility in the currency markets. Analysts from Lombard Odier and other firms highlight that this trend represents a broader reaction to fiscal risks, forcing investors to pivot toward the dollar. The situation remains fluid as market participants monitor potential political shifts across European nations.