Dollar Surges as Euro Hits 17-Month Low Amid 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 growing fiscal concerns in France and a selloff in European bonds. The dollar's strength persisted despite weaker-than-expected U.S. jobs data, which significantly reduced expectations for a Federal Reserve rate hike in October. Markets now price a 78% probability that the Fed will keep rates unchanged this month, up from 36% just a week earlier.
The euro's decline has been a key driver of the dollar's recent strength, falling for four consecutive weeks due to worries over France's rising debt and political uncertainty ahead of next year's election. The selloff in European bonds has also sparked concerns about contagion across the continent, pushing global borrowing costs to multi-decade highs as investors weigh persistent inflation risks and deteriorating fiscal positions.
The dollar remains supported by longer-term expectations for higher U.S. rates, even as near-term rate hike expectations have eased. The yen continued its weakness, trading around 158.10 per dollar, while the Australian and New Zealand dollars also faced pressure. Other Asian currencies, such as the Indian rupee, Indonesian rupiah, and Malaysian ringgit, saw mixed movements as China and South Korea's domestic markets remained closed for holidays.
The broader bond rout last week pushed the 10-year Treasury yield to around 5.26%, after briefly reaching a 24-year high before some calm returned to bond markets. The dollar's resilience highlights its role as a safe-haven asset amid global uncertainties, even as U.S. rate expectations have shifted.