Dollar Stays Strong as Euro Hits 17-Month Low on French Fiscal Worries
The U.S. dollar maintained its strength against major currencies at the start of the week, supported by safe-haven demand amid global bond market volatility. The euro traded near a 17-month low against the dollar, reflecting concerns over France's fiscal stability and political uncertainty ahead of next year's elections. Despite a weaker-than-expected U.S. jobs report, which lowered expectations of a Federal Reserve rate hike this month, the Dollar Index remained near its highest level in about 17 months.
EUR/USD fell to $1.1246, close to its weakest point since May 2025, while the pound traded at $1.3241. The dollar-yen pair reached 157.69 yen in early Asian trading. The Dollar Index stood at 101.97 points. Last week's broad-based selloff in global bonds pushed borrowing costs to multi-decade highs, with French government bonds also under heavy selling pressure.
The U.S. 10-year Treasury yield held at 5.262%, slightly below the 24-year high hit last week. Friday's jobs report showed nonfarm payrolls falling short of expectations, with the unemployment rate and average hourly earnings also declining. This weakened the case for a Federal Reserve rate hike in October, though markets still anticipate hikes in December and early 2027.
Analysts like Mansoor Mohi-uddin of Bank of Singapore and Mohit Kumar of Jefferies noted that the labor market is not overheating, and inflation remains above the Fed's 2% target. They suggested that the market's aggressive rate hike expectations may not materialize. Meanwhile, caution over Japan-U.S. intervention kept the dollar-yen pair capped around the 158 level.