Investing.com – The U.S. dollar retreated across foreign exchange bourses on Tuesday, surrendering part of its previous session’s advance as a landmark surge in demand for Japanese long-term sovereign debt propelled the yen higher and a fragile calm across French streets allowed the euro to steady.
The U.S. Dollar Index, which measures the greenback against a basket of six major trading partners, fell 0.19% to 101.79, reversing its modest rise to 101.98 from Monday and resuming a broader downward bias driven by easing U.S. Treasury yields.
Record-breaking Japanese bond sale triggers Yen surge
Across Asian G10 crosses, the Japanese yen emerged as the clear foreign exchange standout, snapping a two-day decline and forcing a sharp unwind of long-dollar positions.
Investors flooded a 20-year Japanese Government Bond (JGB) sale with unprecedented demand. The auction drew a record bid-to-cover ratio of 5.84 times the amount offered, as per Reuters – the highest bid ratio recorded since the 20-year maturity was introduced in 1987.
The massive demand surge sent 20-year JGB yields tumbling by up to 6 basis points to 3.71%, signaling strong institutional appetite to lock in elevated yields.
The sudden influx of capital into yen-denominated duration pushed USD/JPY down 0.3% to trade near 158.10 – its best showing in three weeks – checking recent dollar upside momentum ahead of the Bank of Japan’s upcoming policy review.
Euro pauses as French unrest eases and budget vote looms
The euro stabilized after touching its lowest levels since May 2025 last week, with EUR/USD ticking up 0.2% to $1.1231.
Social turmoil across France showed signs of temporary moderation overnight after authorities enforced strict municipal curfews across Paris, Nice, and several major urban centers following days of violent anti-government protests.
Despite the temporary lull on the streets, French sovereign risk remains a primary overhang for the single currency. The spread between French 10-year OATs and benchmark German Bunds expanded nearly 10 basis points to 147.3 bps on Monday, reflecting persistent institutional skepticism over Paris’s public finances.
Foreign exchange desks are closely watching France’s lower house of parliament as lawmakers prepare to vote on the revenue section of the proposed 2027 budget – a key test for President Emmanuel Macron’s administration as it seeks to reign in a 5.4% GDP budget deficit.
