Euro Slides as French Debt Fears Bite, While the Yen Posts Its Best Week in a Month

Friday delivered a rare split-screen in currency markets: the euro sank on France’s fiscal troubles, the yen climbed on a rush for safety, and the dollar ended the week almost where it started. The euro closed down 0.21% at $1.1191, capping a 0.43% weekly loss, and its fall against the yen was sharper — it touched 175.08 yen, its weakest since October 2025, on course for a 1.1% weekly decline. The trigger was a selloff in French government bonds that pushed France’s debt risk premium to its highest level since the eurozone sovereign debt crisis of 2011.

The politics behind the move are unusually concrete. France is deploying 70,000 police backed by specialist units for protests on Saturday, and the country also faces a Moody’s ratings review on Friday — a combination that has bond traders pricing in real fiscal risk rather than abstract worry. As Bannockburn Global Forex strategist Marc Chandler put it, the pressure in European bond markets has eased for now, but the Moody’s review late in the day “poses a challenge” and more unrest is likely over the weekend. The data offered no comfort either: eurozone growth slowed in October to its weakest pace in four months on a renewed contraction in France, though Citi’s Giada Giani noted the rest of the euro area “remains resilient.”

The yen, meanwhile, played its classic shelter role. It eased on Friday to 156.9 per dollar but still finished the week about 0.7% higher — its best since mid-September — as investors fled Thursday’s selloff in AI stocks. MUFG currency analyst Lee Hardman said the yen “has continued to trade at stronger levels at the end of this week, encouraged by more risk-off trading conditions.” The dollar index itself rose 0.25% to 101.82 on Friday, yet its weekly gain was just 0.03%: a near-flat week that hides a lot of churn underneath. The dollar also tracked higher Treasury yields and a sharp rise in crude oil — Brent touched its highest since early May on Middle East supply fears — while it slipped to 1.4006 against the Canadian dollar on reports Washington may halve its tariffs on Canadian goods.

Why this matters: currency markets are telling two stories at once. One is fiscal credibility — when a major eurozone government’s borrowing costs blow out to 2011 levels, traders treat it as systemic, not local. The other is about the AI trade, which has become a two-way macro risk for the dollar itself: ING analysts argue the greenback has already lost some of its safe-haven status because of its exposure to an AI downturn, while Convera counters that tech selloffs should cause only temporary dollar corrections unless stress spreads to credit markets. Both stories converge on next week, when the Federal Reserve, the European Central Bank and the Bank of Japan all hold policy meetings. All three are expected to stand pat, but the guidance will matter more than the decisions.

What to watch next: the December hike odds already priced in — 81% for the Fed, 66% for the ECB and 61% for the Bank of Japan, per LSEG — and whether Japan’s core inflation, which topped the Bank of Japan’s 2% target in September for the first time in nine months, pushes Tokyo toward a hike. Watch France first, though: the weekend protests and the Moody’s verdict will set the euro’s tone before any central banker speaks. Readers following these moves can track the big picture in our forex section, and the forex tools page has calculators for sizing positions around volatile weeks like this one. (Not financial advice.)