Dollar Hits 17-Month High as French Fiscal Fears and a Global Bond Rout Crush the Euro

The dollar sat at a 17-month high on Friday after a global bond sell-off and mounting worry over France's finances knocked the euro to its weakest level since May 2025. The single currency traded around $1.1237, Reuters reported.

The trigger was Thursday's rout in government debt. The US 10-year Treasury yield jumped to 5.344%, its highest since 2002, before easing to around 5.249% on Friday. That is a long way past the 5% threshold that already rattled markets.

Europe took the harder hit. French borrowing costs climbed to a 14-year high, and the gap between French and German 10-year yields pushed above roughly 150 basis points, a level not seen since the eurozone debt crisis in late 2011. Investors have been dumping French bonds over fears of a new debt crisis, and the currency is now paying for it.

The dollar index hovered near 102.08 and was on track for roughly a 1% weekly gain, its third straight week of advances, according to the Reuters wire.

What makes the move striking is that it is not really about the Federal Reserve. Soft US inflation data had just cut bets on a near-term rate hike, which would normally weigh on the dollar. Instead, analysts at TD Securities and Pepperstone described the rally as a flight to safety and a verdict on Europe's problems.

Those problems are piling up. Higher oil prices from the Middle East energy shock are feeding fears of sticky inflation, governments everywhere are borrowing heavily, and investors are demanding more to hold long-term debt. Add political risk in Paris, and the euro is the easiest place for that anxiety to show up.