Dollar creeps towards 18-month high, euro lags as bond yields rise again

The dollar has crept closer to its 18-month peak on Thursday, while the euro struggled to gain ground amid rising bond yields across the euro zone. Minutes from the US Federal Reserve's meeting signalled policymakers viewed inflation as the primary risk to their outlook, prompting the dollar's ascent. The global bond sell-off has been the key driver in currency markets, with yields surging again as oil prices rose.

The widening gap between German and French 10-year yields, a gauge of the risk premium attached to France, has pushed the euro to its weakest level since May last year. French government bonds have faced significant selling pressure due to concerns about France's fiscal situation ahead of next year's presidential election. The euro was down 0.2% on Thursday, trading at US$1.1174, close to its lowest point in 17 months.

The dollar index, tracking its strength against a basket of six currencies, including the euro, rose 0.2% to 102.40. The US dollar remains near its strongest levels since April 9, following market turmoil caused by US President Donald Trump's tariff announcement. Fed policymakers unanimously voted to raise interest rates by a quarter of a percentage point during their September 15-16 meeting, with minutes released on Wednesday indicating a potential further tightening.

While the minutes did not significantly alter expectations, there is no imminent rate hike at the Fed's upcoming meeting. Against the yen, the US dollar gained 0.1% to 158.27, reversing a brief dip following Japanese data showing a current account surplus of 4.062 trillion yen in August. The Australian dollar slipped 0.3% to US$0.6943, and the New Zealand dollar fell 0.2% to US$0.5588. The US dollar remained flat at 6.7050 against the Chinese yuan in offshore trade.