US Dollar Holds Near Highs Amid French Fiscal Instability

The US dollar remained strong on October 5, 2026, hovering near a 17-month high as investors sought safe-haven assets. This strength was driven by global debt sell-offs and fiscal instability in France, where concerns over debt levels and potential political gridlock ahead of next year's election pushed the euro to $1.1246, its lowest level since May 2025.

Market sentiment regarding US monetary policy has shifted following a soft September labor market report. Traders now price in a 78% chance that the Federal Reserve will hold interest rates steady in October, a significant increase from the 36% probability estimated a week prior. This reduction in immediate rate-hike expectations led to a slight consolidation of Asian currencies, with the dollar edging 0.1% lower to 157.68 yen while remaining stable at 1.2793 Singapore dollars.

Despite the pause in October, the US dollar index reached 101.97 as rising Treasury yields continued to attract investors. Market expectations still include a rate hike in December and two more in the first half of 2027, although some analysts argue this pricing is too aggressive. The European Central Bank is expected by some analysts to deliver only one rate hike in comparison.