Canadian Dollar nears 18-month lows as risk aversion buoys the US Dollar

The US dollar made strides towards an 18-month peak on Thursday, as the euro faced pressure from rising yields. Minutes from the Federal Reserve revealed policymakers were concerned about inflation as the main risk. Higher oil prices and an uptick in euro zone bond yields contributed to the euro's decline, reaching its weakest point since May 2024.

The widening gap between German and French 10-year yields amplified the euro's weakness. French government bonds faced selling pressure due to concerns over France's fiscal situation leading up to the presidential election. The euro slid 0.2% to US$1.1174, nearing its lowest level in 17 months. The dollar index, measuring its strength against six currencies, rose 0.2% to 102.40 after a 0.4% increase on Wednesday.

The dollar remains close to its strongest levels since April 2025, following market turmoil caused by President Trump's tariffs. Fed minutes signaled policymakers' hawkish stance, but expectations for rate hikes later in the month remain unchanged. The dollar strengthened against the yen and hovered around 6.7050 against the Chinese yuan in offshore trade.