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The U.S. dollar strengthened against major currencies on Monday, October 5, as the euro fell to its lowest level in 17 months and several Asian currencies weakened. Concerns about France’s public finances and a selloff in European bonds supported demand for the dollar, outweighing a weaker-than-expected U.S. jobs report that had reduced expectations for an October Federal Reserve rate increase.
The euro touched $1.1161 in Asian trading, its lowest level since May 2025, before trading around $1.117. The dollar index, which measures the greenback against six major currencies, rose about 0.5% to roughly 102.4. The Japanese yen also weakened, with the dollar trading near 158.10 yen.
French fiscal concerns weigh on the euro
Investors have focused on France’s debt burden and political uncertainty ahead of the country’s 2027 election. A sharp decline in French government bonds has raised concern that pressure could spread to other European markets, adding to the euro’s vulnerability after four consecutive weekly losses.
The pressure comes amid a broader bond-market selloff that pushed borrowing costs higher across major economies last week. Investors have also been assessing inflation risks associated with elevated oil prices and the implications of deteriorating fiscal positions. The U.S. 10-year Treasury yield stood near 5.26% on Monday, after briefly reaching a 24-year high the previous week.
The euro’s decline was not limited to its exchange rate against the dollar. It also weakened against the Swiss franc and sterling, while French bond futures remained near recent lows, according to market reports. Those moves underscored how concerns about French debt and political gridlock were affecting both currency and bond trading.
Asian currencies show broad pressure
Several regional currencies lost ground as the dollar advanced. The Australian dollar fell about 0.3% to $0.694, while the New Zealand dollar slipped roughly 0.4% to $0.559. The Australian currency remained below the $0.70 mark as traders responded to the firm dollar and shifting expectations for global monetary policy.
Among emerging Asian currencies, the Indonesian rupiah and Thai baht weakened against the U.S. currency, while the Malaysian ringgit and Singapore dollar also declined. The Indian rupee was little changed. The offshore Korean won weakened, while the Chinese yuan was broadly steady in offshore trading.
Trading conditions in the region were thinner than usual because mainland China and South Korea were closed for holidays. That limited activity in local markets, although their currencies continued to trade offshore. The yen’s weakness also reflected the wide gap between U.S. and Japanese interest rates; the market remained attentive to the possibility of intervention by Japanese authorities.
Weak U.S. jobs report shifts rate expectations
Friday’s U.S. employment report showed September job growth slowing more than expected, tempering bets that the Federal Reserve would raise rates at its October meeting. Traders were pricing in a 78% probability that the central bank would leave rates unchanged this month, compared with 36% a week earlier, based on CME FedWatch data reported by market outlets.
That change in near-term rate expectations did not prevent the dollar from rising. The currency was supported by elevated Treasury yields and its appeal during a period of volatility in government bond markets, while the euro faced its own region-specific fiscal concerns.
Market pricing still pointed to the possibility of a rate increase in December and further increases in the first half of 2027. Those are investor expectations, not confirmed Federal Reserve decisions. The central bank’s October policy decision remained ahead, and the available reporting did not establish any change in its official guidance.
What markets are watching next
For currencies, the immediate focus is whether bond-market volatility and France’s fiscal outlook continue to unsettle the euro, alongside upcoming U.S. data and the Federal Reserve’s rate decision. The dollar’s advance on Monday came even as expectations for an October hike eased, illustrating that currencies were responding to several forces at once rather than interest-rate forecasts alone.
In Asia, holiday-thinned trading left some regional price moves less representative of activity in domestic markets. Investors were also watching the yen’s sensitivity to the U.S.-Japan rate gap and the risk of official intervention. The next central-bank decisions and economic releases may alter expectations, but no policy action or intervention was reported as having occurred on Monday.
