Dollar at 17-month high as global bond rout hits euro

The US dollar was perched at a 17-month high on Friday and on track for its third consecutive week of gains, according to a Reuters report datelined Singapore on October 2. The move came as a rout in global bond markets pushed borrowing costs around the world to multi-decade peaks, driven in part by inflation fears tied to higher oil prices.

The sell-off was most visible in US government debt. Yields on benchmark 10-year Treasuries climbed to 5.344% on Thursday, their highest level since 2002, as investors positioned ahead of a US jobs report that could shape expectations for the near-term policy outlook. Rising long-dated yields often support a currency by making its assets more attractive to yield-seeking investors, though they can also reflect concern about inflation and government financing needs rather than confidence in growth.

The dollar index, which measures the US currency against six major rivals, stood at 102.08 and was set for a gain of about 1% for the week. Reuters noted that a run of three straight weekly advances was last seen in May 2025.

Much of the dollar's recent strength has come at the expense of the euro. The single currency was quoted at $1.1237, hugging its lowest level since May 2025, weighed down by worries about France's fiscal health. Yields on French government debt have surged to a 14-year high as concerns about the country's finances circulate. The euro has also struggled against the Japanese yen and the Swiss franc.

Reuters attributed the broader pressure on the euro to rising political risk in Europe alongside an energy shock stemming from a seven-month-long war in the Middle East, which has dented sentiment toward the currency. Higher energy costs are a particular issue for the euro area, which imports much of its fuel, because they can simultaneously raise inflation and weigh on growth.

The yen was steady at 158 per US dollar. The report noted that data showed annual core inflation in Tokyo accelerated in September at its fastest pace in 10 months. Tokyo consumer price figures are published ahead of the nationwide release and are watched as an early indicator of the inflation trend in Japan, a key input for the Bank of Japan's policy deliberations.

Charu Chanana, chief investment strategist at Saxo, said in comments carried by Reuters that investors are confronting an uncomfortable mix of sticky inflation, heavy government borrowing and large bond supply. That combination has been a recurring theme in markets, where governments in several advanced economies are issuing substantial amounts of debt at the same time that central banks are no longer large-scale buyers of it, leaving private investors to absorb the supply.

For currency markets, the interplay between bond yields and exchange rates is central. When yields rise faster in one country than in others, capital tends to flow toward the higher-yielding market, lifting its currency. But when yields rise because investors doubt a government's fiscal trajectory, the currency can weaken even as borrowing costs climb — a dynamic that commentary cited in the report linked to the euro's performance against the dollar, yen and Swiss franc.

The immediate focus for traders was the US employment report referenced in the story, which was due to follow the week's bond-market turbulence. Labour market data typically influence expectations for Federal Reserve policy, and shifts in those expectations feed quickly into Treasury yields and the dollar.

Market levels cited here reflect the quotes reported at the time of publication on October 1–2, 2026, and currency and bond prices change continuously. Readers should consult live data and the original source for the most current figures.

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