SINGAPORE – The US dollar is on track for a third consecutive week of gains on Friday, reaching a 17‑month peak as a bond market rout drives global borrowing costs to multi‑decade highs amid inflation concerns sparked by rising oil prices.
Investors were reeling from a sharp global bond sell‑off on Thursday, pushing yields on benchmark US 10‑year Treasuries to 5.344%, their highest since 2002, ahead of a US jobs report that could shape near‑term policy expectations.
The 10‑year yield stood at 5.249% in early Friday trading, while the rest of the bond market also steadied.
The euro traded at $1.1237, near its lowest level since May 2025, weighed by concerns over France’s fiscal health. The yen held steady at ¥158 per US dollar after Tokyo’s annual core inflation accelerated in September at the fastest pace in ten months.
The dollar index, which measures the US currency against six major rivals, stood at 102.08, heading for a 1% weekly rise—the third straight week of gains last seen in May 2025.
Charu Chanana, chief investment strategist at Saxo, said investors are confronting the uncomfortable mix of sticky inflation, heavy government borrowing and large bond supply.
“The fact that long-end yields are pushing higher even as expectations for an immediate Fed hike have eased suggests this is increasingly about the term premium and fiscal risk, not just the next Fed decision,” she said.
US consumer prices rose less than expected in August, with downward revisions to July’s figures, prompting traders to scale back expectations of a Federal Reserve rate hike later this month, data showed on Wednesday.
Two of the Fed’s top policymakers this week made an unusually clear case for taking more data before deciding on another increase.
This has sharpened focus on the US payroll report due later in the day, with data likely to show that job growth slowed in September and the unemployment rate forecast at 4.1% for a third consecutive month.
“With the Fed now myopically focused on inflation and price pressures, a hot wages print could prove particularly influential for US rates, Treasuries and the US dollar,” said Chris Weston, head of research at Pepperstone.
Brent crude futures climbed above $100 a barrel as traders monitored stalled talks between the US and Iran to end the Middle East conflict.
The British pound stood at $1.3187, while the Australian dollar was 0.18% softer at $0.6918—both near three‑month lows. The New Zealand dollar fell 0.22% to $0.5591, its lowest level since November 2025.
“Clearly the market is not pricing for a hawkish Fed,” said Prashant Newnaha, senior rates strategist at TD Securities. “This is a flight‑to‑safety move spurred on by developments in Europe. In this scenario expect the dollar index and the yen to strengthen at the same time.”
Much of the dollar’s recent strength has come at the euro’s expense, as rising political risk in Europe and the energy shock from the seven‑month war in the Middle East dampened sentiment toward the single currency.
The euro has also struggled against the yen and the Swiss franc, while yields on French debt have surged to a 14‑year high amid concerns over France’s fragile finances.
Pepperstone’s Weston said the nature of the dollar move is shifting. “Increasingly, the story is becoming less about US exceptionalism and more about problems elsewhere, particularly in Europe.”
(Reporting by Ankur Banerjee in Singapore; Editing by Lincoln Feast)