Dollar Near 17-Month High as French Debt Concerns Weigh on Euro

The U.S. dollar is holding near a 17-month high as traders reassess Federal Reserve policy expectations following weaker-than-expected September jobs data. The dollar index stands at 101.97, supported by elevated Treasury yields, with the 10-year yield at 5.262%. The euro is under pressure, trading at $1.1246, near a May 2025 low, as concerns over France's debt and political uncertainty weigh on the currency.

Matthew Ryan, head of market strategy at Ebury, notes that the dollar is benefiting from higher Treasury yields and safe-haven demand amid global bond market volatility. OCBC strategists suggest that if rate volatility remains high, the euro and other cyclical currencies could face continued pressure.

Market expectations for a Federal Reserve rate hike in October have dropped to 22% from 64% last week, though traders still anticipate a hike in December and two more in early 2027. The euro's weakness is further exacerbated by France's debt concerns and political gridlock ahead of next year's election.

Other currencies are also feeling the impact, with the Swiss franc trading at 0.8286 per dollar and 0.9312 per euro after a 1% rise last week. The Australian dollar is steady at $0.6956, while the New Zealand dollar has slipped 0.1% to $0.5610.