Dollar Surges to 17-Month High Amid Oil-Driven Inflation Fears and French Fiscal Worries

The US dollar has reached its highest level in 17 months, driven by rising bond yields and concerns over French fiscal health. The euro, meanwhile, is hovering near its lowest point since May 2025. Moh Siong Sim, a currency strategist at OCBC in Singapore, attributes the initial move higher in yields to rising energy prices, but notes that European fiscal risk concerns are now taking center stage.

The underperformance of French and Italian government bonds relative to US Treasuries and German Bunds is a clear indication of a flight into safer markets. The dollar strength is particularly evident against European currencies, with the exception of the Swiss franc, which has seen a revival in its safe-haven status.

Attention will soon turn to the US payroll report due later today, which is expected to show job growth slowing in September. This follows data released on Wednesday showing that US consumer prices rose less than expected in August, leading traders to rein in wagers of a rate hike from the Federal Reserve later this month.