Asian foreign exchange markets were broadly weaker on Monday as the U.S. dollar strengthened, led in part by a sharp decline in the euro that pushed it to a 17-month low. Market activity across Asia was thinner than usual because of holidays in China and South Korea, but the dollar's advance was evident across a range of Asian currency pairs.
The U.S. dollar index traded near 102.48, up roughly 0.5%. USD/JPY rose about 0.2% to 158.10. EUR/USD declined 0.7% to 1.117, having earlier touched $1.116, its lowest print since May 2025. GBP/USD slipped about 0.3% to 1.320.
The dollar's gains came even as the U.S. employment report for September showed weaker-than-expected job growth, a result that substantially lowered the probability of a Fed rate increase in October. Markets now assign roughly a 78% chance that the Federal Reserve will keep rates unchanged this month, up from about 36% a week earlier.
Why the euro's slide matters
The single currency's fall was a central determinant of Monday's dollar strength. The euro has now weakened for four straight weeks as investors confront growing concerns over France's mounting debt burden and political stalemate ahead of next year's election. The sharp selloff in French government debt has raised fresh worries about possible contagion across the rest of European markets, amplifying pressure on the euro.
That pressure on European fixed income spilled into a broader global bond rout last week, pushing borrowing costs toward multi-decade highs. Investors weighed persistent inflation risks tied to elevated oil prices against deteriorating fiscal positions in parts of Europe, a confluence that has contributed to higher yields and tighter financial conditions.
Where rates and yields stand
The U.S. 10-year Treasury yield was trading around 5.26% after briefly reaching a 24-year high last week before some stabilization in bond markets. While weaker September payrolls changed expectations for an October Fed hike, markets still price in further tightening later in the cycle, keeping a degree of longer-term support under the dollar.
Analysts and market participants now see the Fed resuming its tightening path in December, followed by further increases through the first half of 2027. Those forward-looking expectations for higher U.S. rates are helping sustain the dollar even as the immediate prospect of an October move has diminished.
Asian currencies and regional moves
The yen extended its weakness at about 158.10 per dollar, a move driven by both the euro's decline and broader risk aversion that has favored the dollar. Japan's currency remains sensitive to the wide interest rate differential between U.S. and Japanese yields as well as the potential for further intervention by Tokyo, a point markets continue to watch closely.
Commodity-linked currencies also traded lower. AUD/USD fell roughly 0.3% to $0.694 and NZD/USD slid about 0.4% to $0.559, leaving the Australian dollar below the $0.70 mark amid the stronger dollar and shifting global rate expectations.
Other Asian pairs showed varied moves: USD/INR was little changed at 96.258; USD/IDR gained about 0.6% to 17,927.3; USD/MYR rose 0.2% to 4.088; USD/SGD climbed roughly 0.3% to 1.282; and USD/THB increased about 0.5% to 33.686. Markets in China and South Korea were closed domestically for holidays, but offshore trading reflected currency reactions: USD/KRW was up about 0.4% at 1,347.35, while USD/CNH and USD/CNY were effectively flat in offshore trading.
Outlook and near-term drivers
Much of the dollar's run-up in recent weeks had been tied to expectations of renewed Fed rate rises as inflation remained elevated. The softer-than-expected U.S. jobs data altered that near-term calculus, reducing the likelihood of an October rate hike, but markets still anticipate additional tightening later in the cycle. That longer-horizon view, together with the euro's weakness and elevated sovereign bond yields in parts of Europe, continues to underpin the dollar's strength.
For market participants, the immediate focus will remain on bond market dynamics, developments around France's fiscal situation, and incoming U.S. economic data that could further shift the timing of expected Fed moves.