Dollar hits 17-month high versus euro as bond selloff lifts yields

On October 1, the US dollar reached a 17-month peak against the euro due to a sharp sell-off in government bonds worldwide, pushing Treasury yields to record highs. The euro dropped below $1.123 for the first time since May 2025, declining 0.79% to $1.1238. September saw the euro's largest monthly decline in nearly a year. Brian Daingerfield, head of G10 FX strategy at NatWest Markets, attributed the rise to concerns about fiscal policy and inflation, especially after weak French bond markets.

The 10-year US Treasury note hit its highest level since 2002, sitting at 5.272%. The euro also weakened against the yen and Swiss franc, barely staying positive against the pound. US inflation data showed a lower-than-expected rise in August, dampening expectations for a Federal Reserve rate hike. Meanwhile, global bond markets recorded their biggest monthly decline in years, contributing to rising yields.