Ankur Banerjee
SINGAPORE (Reuters) – The euro fell on Thursday after the widely expected collapse of the French government fueled concerns about the region’s second-largest economy, while bitcoin galloped above $100,000 for the first time.
The world’s most famous cryptocurrency has been under attack since November due to expectations that Donald Trump’s victory in the US election will lead to a friendlier regulatory environment for cryptocurrencies.
It rose as high as $101,626 in Asian hours and was last up 3% at $100,882, taking its year-to-date gains to 138%.
“If we’re talking about where we’re going next, there’s reason to believe this thing could continue,” said Kyle Rodda, senior financial market analyst at Capital.Com.
“Given reduced regulatory risk, the continued appeal of non-fiat assets due to perceptions of US fiscal profligacy, and higher geopolitical risks, there are continued headwinds that could support price gains.”
The euro hit $1.052175, trading in tight ranges in Asian hours, but was close to a two-year low of $1.03315 touched in late November as traders braced for a protracted showdown on France.
French lawmakers voted no confidence in the government on Wednesday, as expected, plunging the country deeper into a crisis that threatens its ability to pass laws and tame its huge budget deficit.
“Government collapse means political uncertainty will persist and continue to weigh on business and consumer confidence,” said ING economist Charlotte de Montpellier.
“Finding a new prime minister who does not face a no-confidence motion directly will be a very difficult mission. It is therefore likely that France will be without a government for several weeks, if not months.”
Asked whether the European Central Bank would step in to help France if market turbulence intensified, central bank president Christine Lagarde only said that financial stability was a relevant factor in price stability.
At a parliamentary hearing on Wednesday, Lagarde said that eurozone economic growth could be weaker in the coming months and that downside risks dominate the medium-term outlook.
Traders are almost certain the ECB will cut rates next week and are forecasting 157 basis points of easing by the end of 2025.
In Asia, South Korea’s won was steady as the nation’s finance ministry said the government would activate 40 trillion won ($28.35 billion) worth of funds to stabilize markets following the chaos that followed President Yoon Suk Yeol’s declaration and subsequent lifting of a state of emergency .
South Korean lawmakers have proposed impeaching Yoon over the debacle that rocked global markets. The won remains near a two-year low against the dollar and is the worst-performing Asian currency this year. Last time it was 1,414.41 to the dollar.
The yen edged up slightly to 150.345 per dollar as traders pondered whether the Bank of Japan will raise interest rates later this month. Markets are pricing in a 60% probability of an interest rate hike in December.
In the United States, investor confidence in a rate cut there remained firm despite comments from Federal Reserve Chairman Jerome Powell and a series of overnight economic data that showed activity in the services sector slowed in November after picking up in recent months.
Powell said on Wednesday that the economy is now stronger than the central bank expected in September when it began cutting interest rates, appearing to signal his support for a slower pace of interest rate cuts going forward.
The focus will be on Friday’s nonfarm payrolls report for November, with wages likely to have increased by 200,000 jobs in the month after rising by just 12,000 in October, the smallest number since December 2020, a Reuters poll showed.
Markets estimate a 74% chance of a 25 basis point interest rate cut from the Fed, up from 67% a week earlier, the CME FedWatch tool showed.
which measures the US currency against six rivals, was at 106.27. In other currencies, the Australian dollar was unchanged at $0.64241 after falling around 0.9% in the previous session on weak data.
Sterling was little changed at $1.2709.
