The dollar index climbed to its highest level since April 2025 on Thursday as rising manufacturing input costs met a bond market pause, while the euro slid after France unveiled a 2027 budget targeting a 5% deficit. The yen also weakened as mixed Bank of Japan signals trimmed rate hike odds.
The U.S. Dollar Index climbed 0.6% to 102.03 on Thursday, its highest level since April 9, 2025. The move came as fresh inflation data unsettled currency traders and a slide in the euro added further support to the greenback.
ISM prices index jumps, bond selloff pauses
The Institute for Supply Management's prices index rose to 77.9 in September from 71.1 in August, nearing its 78.3 reading from March. The broader manufacturing gauge expanded in September for a ninth consecutive month.
Despite that, Treasuries steadied. The 10-year yield fell 6.5 basis points to 5.246%. The 30-year yield slipped 2.3 basis points to 5.616%. Attention now turns to Friday's nonfarm payrolls report for further cues on the Federal Reserve's rate path, after Wednesday's data pointed to stronger U.S. growth, a resilient labor market and cooling inflation.
French budget drags on the euro
In Europe, France presented its 2027 budget bill, setting a public deficit target of 5% of GDP. The country's deficit is projected to reach 5.4% of GDP this year, with public debt approaching 120% of GDP. French Prime Minister Sébastien Lecornu said "the deficit will be brought to 5%" after accounting for new defense spending.
French borrowing costs reflected the strain: 10-year OAT yields hit their highest level since July 2002, widening the spread over German Bunds. Against this backdrop, the euro slid 0.7% to $1.1243, its worst day since June 17.
Yen slips as BOJ signals divide policymakers
The yen fell 0.5% to 158.17 per dollar, drifting toward multi-week lows. A summary of opinions from the Bank of Japan's September meeting showed board members split on the pace of interest rate normalization. Some policymakers pushed for faster moves, while others cited a contraction in second-quarter domestic demand.
Following the release, money markets cut the odds of a BOJ rate hike at the October 30 meeting to under 20%. That was down from over 30% earlier in the week, though a December move remains fully priced in.
Source: Investing.com
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