Dollar Strengthens as French Fiscal Woes Weigh on Euro

The US dollar maintained its strong position early this week, trading near a 17-month high as traders reassessed the likelihood of a Federal Reserve rate hike in October following weaker-than-expected US jobs data. Meanwhile, fiscal concerns in France kept the euro under pressure, with the single currency hovering near its lowest level since May 2025 after four straight weeks of declines.

The euro fell to $1.1246, while the British pound and Japanese yen were priced at $1.3241 and 157.69 per dollar, respectively. The dollar index, which tracks the US currency against six major peers, stood at 101.97.

Market volatility persisted after last week's bond sell-off, which sent global borrowing costs to multi-decade highs and hammered French debt. The yield on US 10-year Treasuries dropped to 5.262%, down from a 24-year peak that had rattled investors. Analysts noted that the dollar benefited from rising Treasury yields and safe-haven demand amid the global debt sell-off.

While the euro faced challenges, the dollar's recent strength also stemmed from expectations of Fed rate hikes in the coming months. However, the latest jobs report suggested the labor market was cooling, reducing the chance of an October rate hike to 78%, up from 36% a week earlier. Traders still anticipate a December hike and two more in early 2027, though some analysts view these expectations as overly aggressive.