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

The US dollar reached a 17-month peak on Friday, propelled by a global bond market sell-off that drove borrowing costs to multi-decade highs. The euro weakened to near its lowest since May due to concerns over France's fiscal health. As bond yields surged to their highest since 2002, investors grappled with sticky inflation, heavy government borrowing, and large bond supply.

The dollar index, measuring the US currency against six peers, rose 1% in a week, its third consecutive weekly gain. Charu Chanana, an investment strategist, noted that investors are facing a mix of persistent inflation, government borrowing, and fiscal risk, rather than just a Fed decision. Fed policymakers emphasized the need for more data before deciding on further rate hikes, with a key jobs report due later.

Brent crude prices rose above $100 per barrel as traders monitored stalled US-Iran talks. Sterling and the Australian dollar fell to three-month lows, while the New Zealand dollar dipped to its lowest level since November. The dollar's strength is attributed to flight-to-safety moves due to European developments, particularly the conflict in the Middle East and energy concerns. The euro's decline is linked to rising political risk and the war's impact on sentiment.