Dollar Surges as Euro Hits 17-Month Low Amid Asian Currency Weakness
The U.S. dollar strengthened on Monday, pushing Asian currencies lower and driving the euro to a 17-month low. The euro's decline has been fueled by growing concerns over France's debt and political instability ahead of next year's elections. The broader selloff in European bonds has also raised fears of contagion across the region.
The dollar's rise came despite weaker-than-expected U.S. jobs data, which has reduced expectations of a Federal Reserve rate hike in October. Markets now see a 78% chance the Fed will keep rates unchanged this month, up from 36% a week earlier. However, the dollar remains supported by longer-term expectations of higher U.S. rates.
The Japanese yen and currencies like the Australian and New Zealand dollars also faced pressure. The yen, in particular, remains sensitive to the gap between U.S. and Japanese interest rates, as well as the potential for further intervention by Tokyo. The Australian dollar has struggled to stay above $0.70 due to the stronger U.S. dollar and shifting global monetary policy expectations.
Other Asian currencies, including the Indian rupee, Indonesian rupiah, and Malaysian ringgit, also saw declines. China and South Korea's markets were closed for holidays, but their currencies continued to trade offshore with the USD/KRW pair up 0.4% and the USD/CNH and USD/CNY pairs trading flat.