The euro sank to a 17-month low against the dollar as a global bond selloff pushed Treasury yields to fresh highs. Rising oil prices and fiscal worries in France drove the move, while the dollar notched its sixth straight quarter of gains.
Euro drops below $1.123 for first time since May 2025
The euro fell below $1.123 against the dollar on Thursday, its weakest level since May 2025, as a selloff in government bonds across the US and Europe lifted yields. Higher oil prices fanned inflation concerns, pushing Treasury yields to fresh peaks.
It was last down 0.79% at $1.1238. The currency had already declined nearly 2.5% in September, its largest monthly drop since July 2025.
Fiscal worries and inflation drive the yield surge
According to Reuters: "concern about fiscal policy including some weakness in French bond markets", said Brian Daingerfield, head of G10 FX strategy at NatWest Markets. He added that the broad view is that additional Fed tightening is likely coming, despite a pullback after recent PCE data.
Yields on French debt, hounded by worries about the country's finances, surged to another 14-year high, and German benchmark debt also came under pressure. The yield on benchmark US 10-year notes hit its highest level since 2002, last down 2.28 basis points to 5.272%.
Data on Wednesday showed US inflation rose less than expected in August, with downward revisions to July's figure, which lowered expectations for a Fed rate hike this month. A surge in euro zone inflation, however, underscored the threat that higher energy prices continue to pose to the global economy.
Dollar extends its longest winning streak since 2022
The dollar index was last up 0.57% on the day, after hitting its highest level since April 2025. The greenback closed its sixth straight quarter of gains against a basket of currencies by the end of September, its longest such stretch since 2022.
Global bonds suffered their largest monthly decline in years in September, as deteriorating government finances, a glut of issuance and rising inflation pushed yields higher.
Sterling was down 0.54% at $1.31924 after sliding 2.1% last month, but held steady against the euro, which traded at its weakest point since late June against the pound, around 85.11 pence. The yen weakened 0.11% to 157.6 per dollar, while the Australian dollar fell to a two-month low of $0.69040 after domestic inflation came in below forecasts.
Source: Investing.com
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