US Dollar Hits 18-Month High Amid Rising Yields and European Pressures

The US dollar continued its strong performance in currency markets, reaching 18-month highs as the USD index rose 0.4%. The greenback’s strength was fueled by rising US bond yields and ongoing economic concerns in Europe. France’s fiscal challenges widened the French-German bond spreads to multi-year highs, adding pressure to the euro.

The benchmark US 10-year Treasury yield hit 5.34%, its highest level since 2002, further supporting the dollar. Among major currencies, the Australian dollar (AUD) was the best performer, gaining 0.2% against the USD. However, other currencies like the euro (EUR) and British pound (GBP) fell by 0.3% and 0.2%, respectively.

Australia’s services PMI slowed to 51.9 in September from 53.2 in August, though it was stronger than the preliminary estimate of 51.4. Employment in the sector fell for the first time since May, while inflation pressures intensified. The Reserve Bank of Australia faces a challenging environment as growth slows but inflation remains high.

Meanwhile, the USD/SGD pair climbed to a two-month high, with Treasury Secretary Scott Bessent downplaying concerns about rising US bond yields. He emphasized global trends and the resilience of the US economy, citing strong consumer spending and wage growth despite geopolitical uncertainty.