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

The US dollar reached a 17-month peak on Friday as a global bond sell-off drove borrowing costs to multi-decade highs amid inflationary concerns over higher oil prices. The dollar index climbed to 102.08, marking its third consecutive weekly gain. This surge comes amid worries about France's fiscal health, which dragged the euro to a 14-month low at $1.1237.

Investors are grappling with persistently high inflation, substantial government borrowing, and abundant bond supply, suggesting the term premium and fiscal risk are driving the dollar's strength, rather than the Federal Reserve's next policy decision. The US dollar's rally is fueled by a flight-to-safety move triggered by developments in Europe, with the yen remaining steady at 158 per US dollar.

The dollar's recent gains have been at the expense of the euro, as rising political risks and energy shocks in Europe negatively impacted the single currency.