On Monday, October 5, the U.S. dollar index jumped 0.5% to its highest level in 18 months as a deepening fiscal crisis in France pushed the euro to a 17-month low and sent global investors scrambling for safety. U.S. stock futures were little changed, with Wall Street in wait-and-see mode ahead of the opening bell.
The DXY dollar index rose to 102.423, having touched 102.535 earlier in the session — its strongest reading since April 2025. The euro fell as low as $1.1160, a 17-month low, before recovering slightly to around $1.1202; sterling stood at $1.3241 and the dollar bought 157.69 yen. The greenback drew support from two directions: expectations that the Federal Reserve will raise interest rates again, and mounting fiscal worries in France. "The dollar is the main winner in the current environment," said Matthew Ryan, head of market strategy at Ebury, noting that rising Treasury yields are boosting the appeal of U.S. assets while a global bond selloff is funneling safe-haven flows into the dollar.
The biggest driver of the dollar's strength is in Paris. The gap between French and German 10-year bond yields ballooned past 150 basis points on Friday — the first time since the height of the euro sovereign debt crisis in 2011. Markets fret that France's government cannot pass its annual budget and that the deficit could blow out, while next April's presidential election, where far-right and far-left candidates both stand a chance, makes fiscal retrenchment look politically impossible. Adding to the unease, Spanish Prime Minister Pedro Sanchez on Monday called a snap election over housing reform disputes. Deutsche Bank's Jim Reid framed the key question: is this the start of a new euro sovereign crisis, or have markets already overshot?
Friday's U.S. September nonfarm payrolls report showed only 29,000 new jobs — far below forecasts — with prior months revised lower and the unemployment rate ticking up. LSEG data indicate markets now price only about a 20% chance of a Fed rate hike in October, though a December move remains firmly on the table. Capital Economics argued that despite a second straight week of Treasury curve steepening, the dollar's resilience and contained inflation expectations suggest investors are not yet truly worried about U.S. fiscal risks, and that long-dated yields should eventually fall if the Fed proves less hawkish than currently priced.
U.S. equity futures were little moved: Dow and S&P 500 futures were flat while Nasdaq futures edged 0.1% lower. In Europe, the STOXX 600 rose 0.5% but Paris shares fell to six-month lows. In Asia, Japan's Nikkei jumped 2.4% even as the 30-year Japanese government bond yield hit a record high. CNN's Fear & Greed index stood at 31, in "Fear" territory, with its stock-strength and breadth components reading "Extreme Fear."
Beyond the dollar, the Swiss franc traded at 0.8286 per dollar and 0.9312 per euro after rising more than 1% last week, while German bunds also attracted safety buying. The U.S. 10-year Treasury yield stood at 5.262%, below the 24-year high touched last week; the two-year yielded 4.827% and the 30-year 5.623%. Brent crude futures hovered around $101.7 a barrel, and inflation fears from soaring oil prices remain one of the triggers of last week's global bond rout. OCBC strategists warned that as long as rate volatility stays elevated, pressure on carry trades and cyclical currencies will persist, keeping traditional havens such as the dollar and the Swiss franc supported.