Investing.com – The U.S. dollar held near two-month highs on Thursday, extending its dominance over major counterparts as elevated Treasury yields and persistent geopolitical friction anchored the greenback, while the euro remained constrained ahead of France’s crucial budget presentation.
The dollar index, which measures the greenback against a basket of six major currencies, rose 0.2% to 101.62, capping a strong September performance that delivered its largest monthly advance since June.
Although softer-than-expected U.S. inflation figures trimmed money-market bets for an October Federal Reserve interest rate increase, persistent energy cost inflation and heavy sovereign debt issuance have kept global borrowing costs elevated, providing sustained structural support for the dollar.
Euro constrained by sovereign debt strains and French budget
The euro slipped 0.1% to $1.1300, adding to a 2.5% monthly decline in September – its sharpest monthly contraction since July 2025.
The single currency was on a defensive footing as focus turned to Paris, where Prime Minister Sebastien Lecornu is scheduled to unveil France’s 2027 draft budget later in the day.
With France’s deficit projected to reach 5.4% of GDP this year and public debt approaching 120% of GDP, foreign exchange desks remain wary of sovereign spread widening between French OATs and benchmark German Bunds.
The fiscal pressure arrives alongside persistent cost-push inflation across the bloc, leaving European Central Bank policymakers facing a difficult balancing act between lingering energy-driven price increases and fragile regional growth.
Yen weakens as mixed BOJ signals trim rate hike odds
The Japanese yen gave back recent gains to trade 0.5% lower at 158.24 per dollar, drifting back toward multi-week lows as mixed signals from the Bank of Japan cooled near-term policy tightening expectations.
A summary of opinions from the BOJ’s September meeting revealed clear divisions among board members regarding the pace of interest rate normalization.
While some policymakers advocated for moving rates closer to target more rapidly, others cautioned that domestic demand contracted in the second quarter, questioning whether the broader economy is expanding sustainably.
Following the release, money markets scaled back the probability of a BOJ rate increase at its October 30 meeting to under 20%, down from over 30% earlier in the week, though a December move remains fully priced in by market participants.
(Roushni Nair contributed reporting)
Original Article
Dollar holds as elevated U.S. yields overshadow cooling inflation data
UK 30-year gilt yields rise to 1998 highs; French budget due
Sterling today: Pound slips as global bond rout lifts dollar, gilt yields hit 6%
