Euro slips on French debt worries, yen gains as AI stock rout lifts safe-haven demand

The euro fell on Friday, October 23, and was on track for a weekly loss against both the US dollar and the Japanese yen. A selloff in French government bonds pushed the country's debt risk premium to its highest level since the 2011 euro zone sovereign debt crisis.

The yen was headed for a weekly gain against the dollar, helped by safe-haven flows after a selloff in AI stocks on Thursday. The dollar index was little changed over the week.

France fuels euro pressure

The euro came under pressure from concerns about growing unrest in France and worsening budget problems. France planned to deploy 70,000 police officers, supported by specialist units, for protests on Saturday, Interior Minister Laurent Nuñez said. The country also faced the possibility of a credit-rating downgrade by Moody's.

Marc Chandler, chief market strategist at Bannockburn Global Forex, said pressure in European bond markets had eased, but Moody's review of France's debt rating remained a concern amid expectations of further social unrest over the weekend.

The euro fell 0.21% to $1.1191, putting it on track for a 0.43% weekly loss. Against the yen, it touched 175.08 yen, its lowest level since October 2025. It was last down 0.11%, with a weekly decline of 1.1% expected.

Dollar steady, yen firms

The dollar index rose 0.25% to 101.82, heading for a weekly gain of 0.03%. The yen weakened 0.1% to 156.9 per dollar but remained on track for a weekly gain of around 0.7%. That would be its strongest week since mid-September.

Lee Hardman, senior currency analyst at MUFG, said the yen had continued to strengthen towards the end of the week as investors adopted a more cautious approach to risk.

Central banks and data in focus

Investors were looking ahead to policy meetings next week at the Federal Reserve, European Central Bank and Bank of Japan. All three central banks were expected to leave interest rates unchanged, but markets would focus on signals about future policy decisions.

Fed funds futures traders reduced their expectations of a December rate hike following Thursday's stock market selloff. They still priced in an 81% chance of such a move, according to LSEG data. Traders saw a 66% chance of an ECB rate hike in December. Investors were also watching for guidance after ECB President Christine Lagarde said in late September that a moderate policy response to inflation was appropriate.

Purchasing Managers' Index data showed euro zone private-sector growth slowed in October to its weakest pace in four months. Rising costs and a renewed contraction in France weighed on the reading. Citi economist Giada Giani said the weaker PMI readings brought the data more in line with other growth indicators, while noting that France remained a drag on the region despite resilience elsewhere in the euro zone.

In Japan, data released on Friday showed annual core consumer inflation exceeded the BOJ's 2% target in September for the first time in nine months. Analysts said the reading indicated broader price pressures and strengthened the case for a near-term rate increase. Markets were pricing in a 61% probability of a BOJ rate hike in December.

Karen Brettell reported the story, with additional reporting by Stefano Rebaudo. Xevi Fontdegloria and Rod Nickel edited it.