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The U.S. dollar weakened on Tuesday, retreating from near an 18-month high as the euro recovered and a recent selloff in U.S. Treasury bonds eased.
The U.S. dollar index, which measures the greenback against six major currencies, fell 0.3% to 101.86, though it remained close to its strongest level since April 2025. Meanwhile, the euro gained 0.3% to $1.1259 as European bond markets showed signs of stabilization.
The euro’s rebound came after French presidential frontrunner Marine Le Pen outlined plans for substantial spending cuts if elected. France has faced growing fiscal concerns, with its deficit projected at 5.4% of GDP this year and public debt approaching 120% of GDP. Rising concerns have pushed French 10-year borrowing costs to levels unseen since the early 2000s.
Le Pen said she would restore a primary budget surplus before the end of 2028 and reduce public spending below 50% of GDP by the end of her term. She is targeting €140 billion in savings by 2032.
Macquarie strategist Thierry Wizman said the National Rally’s proposals could reduce France’s fiscal deficit to 3.7% of GDP in 2027 and 2.2% by 2032. However, he questioned whether meaningful deficit reduction was achievable without structural reforms to pensions and social benefits.
The euro also received support from European Central Bank Chief Economist Philip Lane, who said elevated energy prices have not yet produced strong second-round inflation effects across the eurozone. His comments reinforced expectations that the ECB could maintain a measured approach to monetary policy.
In the United States, easing Treasury yields reduced support for the dollar. The benchmark 10-year Treasury yield fell 3.5 basis points to 5.278%, while the 30-year yield settled at 5.661%. Both recently reached their highest levels since early 2002.
Bond markets have been pressured by oil-driven inflation concerns, heavy corporate borrowing to finance artificial intelligence infrastructure, hawkish central banks and rising government debt.
President Donald Trump attributed the dollar’s strength against the euro to strong U.S. economic performance, adding that a strong dollar helps limit inflation.
