Dollar Rises Euro Sinks on French Fiscal Fears
The dollar surged on Monday, benefiting from elevated Treasury yields despite a weaker-than-expected U.S. jobs report that lowered the chances of a Federal Reserve rate hike in October. The euro, meanwhile, hit a 17-month low, falling 0.7% as investors reacted to mounting fiscal concerns in France.
French markets are facing significant pressure due to high debt levels and political uncertainty ahead of next year’s presidential election. The widening gap between French and German bond yields has sparked fears that the instability could ripple across European markets.
Stocks in Europe were expected to open higher, while Asian markets showed gains despite holiday-thinned trading in China, South Korea, and Australia’s New South Wales. MSCI’s Asia-Pacific index rose 1%, and Tokyo’s Nikkei gained 2.5%.
In Japan, the 30-year government bond yield reached a record high, with Prime Minister Sanae Takaichi set to address economic and financial market risks later in the day. Meanwhile, Brazil braced for market volatility after right-wing senator Flavio Bolsonaro advanced to a runoff against President Luiz Inacio Lula da Silva.
The International Monetary Fund announced a staff-level agreement with Sri Lanka, unlocking approximately $345 million in financing under its Extended Fund Facility.