Dollar soars as euro hits 17-month low on French debt fears

The U.S. dollar surged on Monday, putting pressure on Asian currencies and sending the euro to a 17-month low. Fiscal concerns in France and a selloff in European bonds fueled fears of broader market contagion. Trading volumes were light due to market holidays in China and South Korea.

The dollar index rose 0.5% to 102.48, while the euro fell 0.7% to 1.117, briefly touching its lowest level since May 2025. The pound and Australian dollar also declined, with the latter dropping below the $0.70 mark. The yen weakened to 158.10 per dollar as broader risk aversion and the euro’s decline boosted the greenback.

The euro’s slide was driven by deepening concerns over France’s debt burden and political gridlock ahead of next year’s election. A broader bond rout last week pushed global borrowing costs to multi-decade highs, weighing on the single currency. Despite weaker U.S. jobs data reducing expectations for a Federal Reserve rate hike in October, the dollar remained strong due to long-term expectations of higher rates.

Markets now price a 78% probability that the Fed keeps rates unchanged this month, up from 36% a week earlier. However, another two rate increases are still expected in the first half of 2027. The dollar’s strength persisted despite the shifting near-term outlook, supported by its safe-haven appeal and the euro’s weakness.