Dollar nears 18-month high as Fed signals and French debt fears weigh on euro

The US dollar approached an 18-month high in London trading on October 8, as investors weighed Federal Reserve signals about further interest-rate increases and pressure on French government bonds weakened the euro. Reuters reported the euro near a 17-month low, with currency markets responding to rising bond yields and oil prices.

The dollar index, which measures the currency against six others including the euro, rose 0.1% to 102.32 after gaining 0.3% on October 7. The euro was slightly lower at $1.1191. Those figures are the intraday snapshot in Reuters' report published at 08:09 UTC, rather than closing prices.

The dollar remained close to its strongest levels since April 9, 2025. Reuters linked that earlier period to market turmoil following President Donald Trump's tariff announcement the preceding week. The comparison describes the currency's trading history; the latest development is the renewed approach to that level.

French bond pressure adds to euro weakness

Reuters described the global bond selloff as the dominant influence on currency markets in recent weeks, with yields rising again on October 8 as oil prices jumped. Within the euro zone, widening yield gaps between Germany and more indebted countries, including France and Italy, accompanied the euro's decline.

“If you look at euro-dollar, it's not only about dollar strength but euro weakness coming from the political situation in France,” Tommy von Brömsen, an FX strategist at Handelsbanken, told Reuters. His assessment points to pressures on both sides of the currency pair, rather than attributing the move solely to US monetary policy.

What the Federal Reserve decided in September

The Federal Reserve's September 16 statement records a unanimous 12–0 decision to raise the federal-funds target range by a quarter of a percentage point to 3.75%–4%. That was the policy action already taken; the minutes released on October 7 describe the September 15–16 deliberations and do not constitute a new October rate decision.

The statement described economic activity as expanding at a solid pace, domestic spending as resilient and capital investment as robust. Unemployment had changed little, while inflation remained elevated. The committee reaffirmed its 2% inflation goal and said the increase would support a timelier return to it.

The September meeting minutes say most participants considered another rate increase likely to be appropriate by year-end, while stressing that decisions would depend on incoming information. Almost all saw inflation risks tilted upward and labour-market risks broadly balanced.

Participants cited elevated energy prices and investment related to artificial intelligence as inflation pressures. Many warned that persistent energy costs could spread price pressures across sectors. These observations explain the inflation concerns behind the policy discussion, without establishing a single cause for October 8's currency moves.

Borrower strains and the next rate decision

The minutes also described financial pressures beyond currency markets. Fed staff characterised financing as somewhat restrictive for mortgage borrowers and small businesses. Several participants said higher energy prices disproportionately strained lower- and middle-income households. Those were observations about September conditions, rather than measured effects of the latest dollar rally.

The minutes' retrospective market review recorded roughly 35-basis-point increases in Treasury yields across maturities of two to ten years during the period between meetings preceding September's decision. The trade-weighted dollar depreciated over that earlier period. That observation covers a different interval and measure from Reuters' October 8 dollar-index snapshot.

Von Brömsen told Reuters the minutes contained no major surprise but were on the hawkish side. Reuters reported that their release did little to change expectations for the next policy meeting: fed-funds futures implied an 80% probability of unchanged rates at the meeting ending October 28, while a December increase was fully priced in.

The next Federal Open Market Committee meeting is scheduled for October 27–28. Futures pricing describes investors' expectations at the time of Reuters' report, rather than a Fed commitment. The minutes leave further action conditional on incoming information, so neither the October decision nor a December increase has been predetermined.