SINGAPORE, Oct 20: The US dollar traded in a narrow range during early Asian trading on Tuesday as a modest improvement in investor sentiment supported risk sensitive currencies, while political uncertainty in Europe continued to weigh on market confidence.
The euro remained stable at $1.1216, while the British pound gained 0.1 per cent to $1.3308. The Australian dollar also advanced 0.1 per cent to $0.6986, and the New Zealand dollar edged up by the same margin to $0.5668.
Against the Japanese yen, the US dollar was little changed at 158.56 yen as investors awaited an auction of 20-year Japanese government bonds.
Chris Weston, head of research at Pepperstone Group in Melbourne, said foreign exchange markets reflected a gradual improvement in risk appetite, with investors showing renewed interest in currencies offering higher returns.
However, developments in Europe continued to create uncertainty. Weston noted that concerns over French sovereign debt were influencing European equity markets, although the euro’s relative stability suggested that investors had not yet viewed the situation as a broader threat to the region’s financial system.
Political tensions intensified in France after nationwide anti-government demonstrations disrupted President Emmanuel Macron’s final months in office. Authorities imposed curfews in several cities on Monday in response to the unrest.
Italy also faced a fresh wave of disturbances, prompting the government to announce the deployment of 500 troops following two days of unrest.
The political turmoil has renewed concerns about government borrowing costs across Europe. Analysts at ING said the yield gap between French and German government bonds had come under renewed upward pressure amid reports of violent protests.
They added that developments surrounding France’s 2027 budget would remain a key focus on Tuesday, with Parliament scheduled to hold its first formal vote on the revenue section of the finance bill.
The spread between French and German 10-year government bond yields widened by 9.9 basis points on Monday to 147.3 basis points, reflecting increased investor concern over France’s fiscal and political outlook.
In the United States, the yield on the 10-year Treasury bond remained unchanged at 5.131 per cent.
The US dollar index, which measures the greenback against a basket of six major currencies, rose 0.2 per cent to 101.98 on Monday, ending a two-session losing streak.
Meanwhile, the dollar traded flat at 6.6811 yuan in offshore markets after the People’s Bank of China kept interest rates unchanged, as widely expected by market participants.
In the cryptocurrency market, Bitcoin was little changed at $81,906.58, while Ether edged up 0.3 per cent to $2,405.99.
Investors are expected to remain attentive to developments in European politics, government bond markets and monetary policy decisions as they assess the outlook for major currencies and other financial assets.