The dollar is heading for its largest monthly rise against the euro in 14 months, lifted by strong US growth and rising interest-rate expectations while Europe struggles with energy costs and political instability. The Australian dollar, Swiss franc, and Japanese yen have also weakened against the greenback this quarter, and New York Fed President John Williams has pushed back on bets for an imminent rate hike.
The dollar stood near this year's high against the euro on Wednesday and was poised for its largest monthly rise against the single currency in 14 months, powered by US growth and rising US interest rates in contrast to the energy and debt worries swirling in Europe.
Euro slips toward $1.13
The euro sank to its lowest level since May 2025 at $1.1312 on Tuesday. It then traded near $1.1337 in Asia on Wednesday, and is also testing support around 178 yen. The dollar has gained nearly 2.5% against the euro in September. It is on track for a third straight quarterly rise.
Gas prices and French politics weigh on the euro
Earlier this month, benchmark European gas prices spiked to their highest since 2022. French markets are also under pressure from debt and political gridlock ahead of next year's presidential election, and the spread with German yields has blown beyond 115 basis points to its widest since 2012.
Aussie and franc weaken as dollar gains broaden
The stronger dollar has pushed the Australian dollar below 70 cents for the first time since early August. It slipped to a nine-week low of $0.6959 after inflation data came in a fraction under forecasts.
The dollar also touched a nearly 17-month top on the Swiss franc at 0.8358 francs on Tuesday. The franc has weakened partly because investors have sought low-yielding alternatives to the yen to sell for carry elsewhere.
Yen loses its edge as Fed outlook stays in focus
The yen has fallen out of favor as a short against the dollar following the US-Japan yen-buying intervention in July, which was followed by warnings not to test their resolve. That came alongside a pickup in the pace of Japanese rate hikes.
The dollar has dropped 2% against the yen in September. It has also fallen almost 3.8% over the third quarter, touching an almost two-week low of 156.38 yen in Asia trade.
The Fed's preferred inflation gauge, US core PCE, is due out later Wednesday, though markets are more focused on Friday's US jobs report, which could reinforce expectations that US rates are on the rise. According to Reuters, New York Fed President John Williams tempered some of those expectations overnight, saying there is "no need for urgency" in raising rates.
Two-year Treasury yields fell about 3.5 basis points after the remarks. Fed funds futures pricing for a rate hike next month fell to 50% from 71%.
Source: Investing.com/Reuters
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