US Dollar Rises for Fourth Week as Fed Rate Hike Bets Grow

The U.S. dollar extended its winning streak to four consecutive weeks, supported by expectations of additional Federal Reserve interest rate hikes and growing concerns over Europe's fiscal stability. Meanwhile, the euro faced its fifth straight weekly decline as investors remained cautious about France's worsening public finances.

The U.S. Dollar Index (DXY), which tracks the greenback against six major currencies, closed Friday at 102.21, gaining 0.07%, according to Investing.com data. The index advanced approximately 0.3% during the week, marking its longest weekly winning streak since May 2025.

The euro weakened 0.17% to around $1.1194 on Friday, bringing its weekly loss to approximately 0.5%. Persistent uncertainty surrounding France's budget deficit and political challenges continued to pressure the European currency.

France's projected budget deficit of 5.4% and disagreements over its 2027 budget have prompted international investors to reduce exposure to European assets. French 10-year government bond yields approached 4.90%, while their spread over German Bunds widened beyond 140 basis points, reflecting heightened sovereign debt concerns.

Bank of France Governor Emmanuel Moulin emphasized that France must address its fiscal challenges through domestic budget reforms rather than relying on emergency European Central Bank intervention. His remarks reinforced investor concerns about the country's financial outlook.

Meanwhile, expectations of tighter Federal Reserve monetary policy continued to strengthen the U.S. dollar. Minutes from the Fed's September meeting, released Wednesday, indicated that policymakers remain focused on controlling inflation.

Although traders have reduced expectations for an interest rate increase at the Fed's late-October meeting, CME FedWatch data showed the probability of a 25-basis-point hike in December remained above 84%.

U.S. 10-year Treasury yields eased slightly from their highest levels since 2002 but remained near 5.30%. The substantial yield advantage over European government bonds continued to attract international investment into dollar-denominated assets.

Currency traders are now monitoring the University of Michigan's preliminary consumer sentiment report and long-term inflation expectations for further clues about U.S. economic conditions.

Stronger economic indicators could reinforce expectations of additional Fed tightening, potentially supporting the U.S. dollar while keeping the euro under pressure in the foreign exchange market.