Investing.com — The U.S. dollar held near an 18-month high on Tuesday, while the euro remained under pressure near a 17-month low as elevated Treasury yields supported the greenback, with Asian currencies largely rangebound.
Investors also weighed a softer U.S. services-sector reading that lowered near-term Fed hike expectations but pointed to persistent price pressures.
The U.S. dollar index was around 102.11, little changed, after reaching 102.21 and hitting an 18-month high in the previous session. The EUR/USD pair was around 1.123, while the GBP/USD pair rose marginally to 1.3224.
The USD/JPY pair was around 157.92, little changed, while the AUD/USD pair was at $0.698 and the NZD/USD pair at $0.560.
Dollar supported by yields, sticky inflation risks
The dollar’s rally has continued despite weaker-than-expected U.S. jobs data that reduced expectations for a Federal Reserve rate hike this month.
Investors are still betting that the Fed may need to tighten policy later as inflation risks remain elevated.
U.S. services-sector activity slowed in September, but stronger domestic demand put pressure on supply chains and pushed up prices paid by businesses for inputs.
The data suggested inflation could remain elevated into next year, limiting the scope for the Fed to ease policy aggressively.
The rise in Treasury yields has remained a key support for the dollar, with longer-dated U.S. borrowing costs still elevated as markets assess inflation, fiscal risks and the outlook for monetary policy.
Euro weakens as Europe faces fiscal, energy risks
The EUR/USD pair was near $1.1225, after the euro fell to its lowest level since May 2025 in the previous session.
The currency has now extended a roughly 1.2% weekly decline amid political uncertainty and fiscal concerns across the euro zone.
The euro has also been pressured by concerns over higher energy costs and the potential impact on regional growth and inflation.
That comes as markets weigh the prospect that the European Central Bank may need to keep policy restrictive for longer.
Rupee nears record low as RBI smooths decline
The Indian rupee came under pressure, with the USD/INR pair rose 0.31% to 96.593 as dollar strength persisted.
The Reserve Bank of India is expected to continue smoothing the rupee’s decline through market intervention, according to Reuters.
The rupee settled at 96.2925 on Monday and is now about 0.6% away from its record low near 96.96 reached in May.
The RBI is due to announce its policy decision on Wednesday, with markets expecting a 25-basis-point hike to 5.50%, which would be the central bank’s first increase in four years and could provide some support to the rupee.
