Asian currencies came under broad pressure on Monday as the U.S. dollar strengthened, while the euro fell to its lowest level in 17 months.
Investor sentiment was hit by growing fiscal concerns in France and a sharp selloff in European government bonds, raising fears that financial stress could spread across the region.
Trading activity in Asia was relatively thin, with markets in China and South Korea closed for holidays.
Dollar Strengthens Across Global FX Markets
The U.S. Dollar Index rose around 0.5% to 102.48, extending its recent gains.
USD/JPY climbed approximately 0.2% to 158.10, while EUR/USD fell around 0.7% to 1.117.
The euro had earlier dropped to about $1.116, its weakest level since May 2025.
Sterling also weakened, with GBP/USD falling around 0.3% to $1.320.
The dollar remained strong despite weaker-than-expected U.S. employment data, which significantly reduced expectations for another Federal Reserve rate increase in October.
Fed Rate Hike Expectations Decline
Markets are now pricing in approximately a 78% probability that the Federal Reserve will leave interest rates unchanged in October.
That compares with just 36% one week earlier.
The shift followed weaker U.S. jobs data, which showed that employment growth slowed more than expected in September.
Before the report, much of the dollar’s recent strength had been supported by expectations that the Fed would resume raising rates as inflation remained elevated.
Markets still expect further tightening later, including a potential rate hike in December and two additional increases during the first half of 2027.
As a result, expectations for relatively high U.S. interest rates continue to provide longer-term support for the dollar.
Euro Falls as French Debt Concerns Intensify
The euro’s sharp decline has become one of the main drivers of dollar strength.
The single currency has now fallen for four consecutive weeks, as investors focus on France’s rising debt burden and political uncertainty ahead of next year’s election.
Concerns have also increased following a selloff in French government debt.
Investors are increasingly watching for signs that financial pressure could spread into other eurozone markets.
The broader global bond selloff last week pushed borrowing costs to multi-decade highs, as markets weighed persistent inflation risks alongside worsening fiscal conditions.
Higher oil prices have added to those inflation concerns.
Bond Markets Remain Volatile
The U.S. 10-year Treasury yield was trading near 5.26% on Monday.
The yield briefly reached a 24-year high last week before some stability returned to global bond markets.
Elevated Treasury yields continue to support demand for U.S. assets and provide additional backing for the dollar.
At the same time, volatility in European bond markets has encouraged investors to seek relatively safer assets.
Japanese Yen Remains Under Pressure
The Japanese yen remained weak at around 158.10 per dollar.
The currency continues to face pressure from the wide gap between U.S. and Japanese interest rates.
The yen is also sensitive to the possibility of further intervention from Japanese authorities if the currency weakens too rapidly.
Broader risk aversion and continued dollar strength have added to pressure on the Japanese currency.
Australian and New Zealand Dollars Weaken
The Australian and New Zealand dollars also declined.
AUD/USD fell around 0.3% to $0.694, leaving the Australian dollar below the important $0.70 level.
NZD/USD dropped approximately 0.4% to $0.559.
Both currencies have been affected by the stronger U.S. dollar and changing expectations for global monetary policy.
Other Asian Currencies Trade Lower
Elsewhere in Asia, currency performance was mostly weaker against the dollar.
USD/INR was little changed near 96.258, while USD/IDR rose approximately 0.6% to 17,927.3.
USD/MYR gained around 0.2% to 4.088, while USD/SGD increased approximately 0.3% to 1.282.
USD/THB also climbed around 0.5% to 33.686.
Although domestic markets in China and South Korea were closed for holidays, their currencies continued to trade offshore.
USD/KRW rose around 0.4% to 1,347.35, while both USD/CNH and USD/CNY were broadly unchanged.
Asian Currencies Face Continued Dollar Pressure
The near-term outlook for Asian currencies remains closely linked to movements in the U.S. dollar, global bond yields and Federal Reserve expectations.
Although weaker U.S. employment data has reduced the chances of an October rate hike, longer-term expectations for tighter monetary policy continue to support the dollar.
Meanwhile, continued weakness in the euro and concerns surrounding France’s fiscal outlook could keep safe-haven demand elevated and maintain pressure on Asian currencies.
