Dollar Reaches 17-Month Peak: Greenback on Track for Three-Week Winning Streak
The US dollar reached a 17-month high on Friday, marking its third consecutive week of gains. This surge is attributed to a global bond sell-off that has driven borrowing costs higher, resulting in fresh losses for the euro. The dollar index, which measures the US currency against six major rivals, stood at 102.08, indicating a 1% rise for the week.
The dollar’s strength followed a significant sell-off in global bonds on Thursday, with yields on benchmark US 10-year Treasuries peaking at 5.344%, the highest since 2002, before settling at 5.249% in early trading on Friday. This sell-off has pushed borrowing costs to multi-decade highs as investors grapple with inflation concerns linked to rising oil prices. Charu Chanana, chief investment strategist at Saxo, noted that investors are facing persistent inflation, heavy government borrowing, and a large bond supply.
Euro dragged down by France concerns
The euro traded at $1.1237, nearing its lowest level since May 2025, as worries about France’s fiscal health weighed heavily on the currency. The euro has struggled against both the yen and the Swiss franc, with yields on French debt climbing to a 14-year high amid concerns regarding France’s financial stability. Much of the dollar’s recent strength has come at the euro’s expense, driven by rising political risks in Europe and the ongoing energy crisis stemming from the conflict in the Middle East.
Chris Weston from Pepperstone remarked that the narrative surrounding the dollar’s rise is shifting. He stated, “Increasingly, the story is becoming less about US exceptionalism and more about problems elsewhere, particularly in Europe.”
US jobs data in focus
The volatility in bond markets coincides with a reassessment of the Federal Reserve’s interest rate outlook. US consumer prices rose less than anticipated in August, and July’s figures were revised downward, leading traders to lower their expectations for a Fed rate hike this month. Two of the Fed’s top policymakers emphasized the need for more data before making decisions on further hikes.
The US payroll report, due later on Friday, is under close scrutiny. Analysts expect job growth to have slowed in September, with the unemployment rate projected to remain at 4.1% for the third consecutive month. Chris Weston noted that with the Fed focused on inflation and price pressures, a strong wage report could significantly influence US rates, Treasuries, and the dollar.
Yen steady, other currencies near lows
The yen remained steady at 158 per US dollar after data revealed that annual core inflation in Tokyo accelerated in September at the fastest pace in ten months. Brent crude futures rose above $100 per barrel as traders monitored stalled negotiations between the US and Iran regarding the Middle East conflict. The British pound was at $1.3187, while the Australian dollar dipped 0.18% to $0.6918, both hovering near three-month lows. The New Zealand dollar fell 0.22% to $0.5591, marking its lowest level since November 2025.
Prashant Newnaha, a senior rates strategist at TD Securities, commented on the market dynamics, stating, “Clearly the market is not pricing for a hawkish Fed. This is a flight-to-safety move spurred on by developments in Europe.” The dollar’s rise has occurred alongside increasing pressure on European markets, with the euro particularly affected by concerns over France’s fiscal situation and political risks.
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