Key facts
- The euro fell to its lowest point in 17 months against the dollar, trading below $1.13.
- Rising Treasury yields and a strengthening dollar contributed to the euro's decline.
- Concerns over the European economy due to higher oil prices and inflation added to the pressure.
- Political uncertainty in Europe, including upcoming French elections and gains by the far-right AfD party in Germany, also weighed on the euro.
- The euro was last down 0.35% at $1.1291.
- The dollar index was around its highest level since mid-May 2025.
The euro reached a 17-month low against the dollar on Thursday, falling below $1.13 as investors expressed concerns about the regional economy. Higher oil prices and inflation, coupled with mounting political uncertainty in Europe, contributed to the currency's slide. The strengthening dollar, buoyed by rising Treasury yields, further pressured the euro.
The euro's decline was also influenced by its performance against other major currencies. It fell against the yen and the Swiss franc, and barely held its ground against the pound. Yields on French debt surged to a 14-year high, reflecting worries about the country's finances, while German debt also faced pressure.
Data released on Wednesday showed that US inflation rose less than expected in August, with downward revisions to July's figure. This led to lower expectations for a Federal Reserve rate hike this month. However, a surge in euro zone inflation highlighted the ongoing threat of high energy prices to the global economy.
Analysts noted that the euro has struggled to gain traction despite the European Central Bank's interest rate hikes and expectations of further increases. Factors such as long market positions, Europe's status as an energy importer, and political concerns heading into next year were cited as reasons for the euro's weakness.
European stocks and bond prices also fell, adding to the downward pressure on the euro. The dollar index, a measure of the dollar's strength against a basket of other currencies, recorded its sixth consecutive quarterly gain, its longest streak since 2022. The index was trading around its highest level since mid-May 2025.