Euro skids toward fifth weekly fall but selling pressure slows

The euro is on track for its fifth weekly decline, although there are indications the downward trend may be losing steam. France's debt market has shown improvement, while a dip in US yields has dampened the dollar's rally. The euro had reached a 17-month low of US$1.1161 earlier in the week due to concerns over France's high debt and the challenge of budget cuts.

It has since risen to trade at US$1.1211, marking a 0.3% drop for the week and a more than three percent decline over five weeks against the dollar. The euro against the British pound has also slipped 0.3% this week, nearing a 16-month low of 84.74 pence. The euro/yen cross has steadied near 0.9324 francs per euro after its biggest weekly fall in 17 months.

Analyst Matt Simpson noted that such significant moves are rare for the euro, and the current bearish momentum appears to be weakening. France's far-right presidential candidate Marine Le Pen proposed plans to reduce the budget deficit, which markets viewed as a positive sign amid opposition leader Jean-Luc Melenchon requesting the central bank to cancel government debts.

Protests in France, led by students, blocked high schools and marched through cities, highlighting the difficulties leaders face in balancing social spending demands and cautious markets. The bond sell-off in France and student unrest have created a feedback loop, with student riots potentially leading to higher bond yield spreads.

The US dollar showed minor gains and slowed as US yields approached their biggest weekly drop in three months. The yen also experienced a fourth consecutive weekly decline, though recent movements have been minor as it steadied around 158 yen to the dollar. Vishnu Varathan, head of Asia-Pacific macro strategy at Mizuho Securities, observed that the dollar is in a precarious position, supported by the weak euro and yen.

The Australian dollar hovered near US$0.6960, while the British pound was at US$1.3233. New Zealand's currency is in its longest losing streak in over four years, heading for a seventh weekly decline due to low interest rates compared to the Federal Reserve's rate range of 3.75% to 4%. The kiwi was trading at US$0.5601 and is close to breaking its 2025 low of US$0.5485.