Key facts
- The dollar index was at 101.97.
- The euro was at $1.1246.
- Sterling fetched $1.3241.
- The Japanese yen was at 157.69 per US dollar.
- US 10-year Treasury yield was at 5.262%.
- Traders are pricing in a 78% chance of the Fed holding rates steady in October.
The dollar held firm near a 17-month high on Monday, buoyed by safe-haven flows amid global debt market turmoil and concerns over France's fiscal health. Traders are weighing receding odds of a Federal Reserve rate hike this month following softer US jobs data. The euro was at $1.1246, near its lowest level since May 2025, having declined for four consecutive weeks due to France's debt levels and worries about political gridlock ahead of next year's election. Sterling traded at $1.3241, while the Japanese yen was at 157.69 per US dollar in early Asian hours. The dollar index, measuring the US currency against six major units, stood at 101.97. Markets are still impacted by last week's bond rout, which pushed global borrowing costs to multi-decade highs and hit French debt as investors worried about inflation risks from rising oil prices. The yield on US 10-year Treasuries was 5.262%, down from a 24-year high touched last week. Matthew Ryan, head of market strategy at Ebury, noted that the dollar is benefiting from rising Treasury yields boosting US assets and safe-haven flows amid the global debt selloff. OCBC strategists suggested that elevated rate volatility would continue to pressure carry trades and cyclical currencies, while traditional safe havens like the Swiss franc and the US dollar would remain supported. The Swiss franc traded at 0.8286 per dollar, and the Australian dollar held steady at $0.6956, while the New Zealand dollar eased 0.1% to $0.5610. Recent dollar strength has also been attributed to traders pricing in Fed rate hikes, though US job growth slowing more than expected in September has dented these expectations. Mansoor Mohi-uddin, chief macro strategist at Bank of Singapore, stated that the labor market is not overheating despite inflation remaining above the Fed's 2% target, anticipating interest rates to be held steady this month. The CME FedWatch tool indicated a 78% chance of the Federal Reserve holding rates steady in October, up from 36% a week prior, though traders still expect hikes in December and in the first half of 2027. Jefferies strategist Mohit Kumar believes market pricing is aggressive, with his firm's base case being one hike each from the Fed and the European Central Bank, suggesting that by March, either oil prices will be lower or growth will be slower, leading central banks to deliver fewer hikes than currently priced in.