Euro rebounds as French bond yields fall

The euro recovered on October 6 as a decline in French government borrowing yields eased concerns over euro zone debt. France's benchmark 10-year yield fell 11.4 basis points to 4.7506%, while the dollar index slipped 0.32% to 101.83.

The currency's rebound followed a fall to $1.116 in the previous session, its weakest level since May 2025. It had lost more than 1% during the preceding week, extending its weekly losing streak to four. The dollar index was heading for its largest one-day decline since September 3.

An initial retreat in energy prices supported French bonds, although crude later erased its losses. Marc Chandler, chief market strategist at Bannockburn Capital Markets, said territorial gains by Saudi-backed forces in Yemen had pushed oil prices lower, helping reduce French and Italian yields and lift the euro.

French debt has faced pressure as politicians seek to contain the budget deficit before the 2027 election. A snap election called in Spain also weighed on the euro. Globally, yields have risen amid concerns over public finances and expectations of sharp rate increases as higher energy prices linked to the Iran war fueled inflation.

Sterling gained 0.42% to $1.3275 after reaching $1.3283, a one-week high. The yen moved in the opposite direction: the dollar rose 0.11% against it to 158.08.

Expectations for an October Federal Reserve rate increase have diminished following weaker-than-expected U.S. employment figures and comments by some Fed officials. CME FedWatch put the probability of an increase of at least 25 basis points at about 19%, compared with about 51% a week earlier. Markets assigned an 86% probability to a December increase.