The euro fell against the US dollar on Monday as unrest in France heightened concerns about a deterioration in the country’s public finances, while the US currency received support from a recovery in artificial intelligence stocks.
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France’s central government asked some local authorities to impose curfews amid pressure over security failures on Monday, following riots and looting that erupted across the country at the beginning of the week amid anti-government protests.
The unrest is also seen as potentially boosting the chances of Marine Le Pen, leader of the National Rally party, winning next year’s presidential election, which could raise questions about France’s continued membership in the European Union.
“It’s [Le Pen] campaigning on a platform of fiscal austerity, but she is anti-European Union,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.
The euro fell 0.24% to $1.1212. The gap between French government bond yields and German government bond yields widened to 147 basis points, its highest level since the European debt crisis of 2011–2012, compared with around 110 basis points in late September.
The dollar index, which measures the US currency against a basket of currencies including the yen and euro, rose 0.17% to 101.97.
The dollar also gained support as artificial intelligence-related stocks recovered from the sharp sell-off they experienced last week.
The US currency recorded losses last week amid concerns that waning enthusiasm for AI stocks could curb capital inflows and reduce demand for the dollar.
“Markets seem to be adopting a clear view: stock market turbulence is enough to significantly reduce the Federal Reserve’s plans for monetary tightening, even as inflation remains high,” said Francesco Pesole, an FX strategist at ING.
Recent remarks by Federal Reserve officials, including Chair Kevin Warsh, suggest that policymakers are in no hurry to raise interest rates again.
The Canadian dollar pared its gains after data showed that Canada’s annual inflation rate rose to 3.1% in September, slightly below economists’ expectations.
The Japanese yen fell 0.35% against the US dollar to 158.49 yen per dollar.
Reuters + Al-Mamlaka
