Dollar Strong as French Debt Worries Weigh on Euro
The US dollar started the week strong, trading near a 17-month high as traders reacted to softer expectations for a Federal Reserve rate hike in October following weak US jobs data. The euro remained under pressure, falling to $1.1246, its lowest level since May 2025, after four straight weeks of declines. Concerns over France’s rising debt levels and political uncertainty ahead of next year’s elections contributed to the euro’s weakness.
Other major currencies also saw mixed movements. The British pound was at $1.3241, while the Japanese yen traded at 157.69 per US dollar. The dollar index, which tracks the US currency against six major peers, stood at 101.97. Last week’s bond market selloff, which sent global borrowing costs to multi-decade highs, continued to weigh on investor sentiment.
The yield on the US 10-year Treasury note eased to 5.262%, down from the 24-year high reached last week. Analysts noted that the dollar was benefiting from safe-haven flows as global debt markets faced a broad selloff. Matthew Ryan, head of market strategy at Ebury, observed that rising Treasury yields and global debt selloffs were boosting the appeal of US assets.
Traders are now pricing in a 78% chance that the Federal Reserve will hold interest rates steady in October, up from 36% a week earlier. However, expectations for rate hikes in December and the first half of 2027 remain in place. Some analysts, like Jefferies strategist Mohit Kumar, believe the market’s aggressive pricing may be overstated, suggesting central banks may not hike rates as frequently as anticipated.