Dollar Strengthens as Euro Hits 17-Month Low on France Debt Fears
Asian currencies faced broad pressure on Monday as the U.S. dollar surged, with the euro hitting a 17-month low amid deepening fiscal concerns in France. The dollar’s strength persisted despite weaker-than-expected U.S. jobs data, which significantly reduced expectations of a Federal Reserve rate hike in October. Markets now see a 78% chance the Fed will hold rates steady this month, up from 36% just a week earlier.
The euro’s decline has been a key driver of the dollar’s rally, falling for four straight weeks. France’s growing debt worries and political uncertainty ahead of next year’s election have intensified pressure on the single currency. A selloff in European bonds has also raised fears of contagion, pushing global borrowing costs to multi-decade highs as inflation risks and deteriorating fiscal positions weigh on investor sentiment.
The yen extended its weakness, trading around 158.10 per dollar, while the Australian and New Zealand dollars also slipped. The Australian dollar remains below $0.70, impacted by the stronger U.S. dollar and shifting global monetary policy expectations. Other Asian currencies, such as the Indian rupee and Indonesian rupiah, also saw declines, with the USD/INR pair steady at 96.258 and the USD/IDR rising 0.6% to 17,927.3.
Despite the weaker jobs report, the dollar remains supported by longer-term expectations of higher U.S. rates. Markets still anticipate the Fed will resume tightening in December, followed by two more hikes in early 2027. Meanwhile, China and South Korea’s markets were closed for holidays, though their currencies continued trading offshore, with the USD/KRW pair up 0.4% at 1,347.35.