Euro bounces as decline in French bond yields cools debt jitters
TLT•The euro rose 0.35% to $1.126, its strongest daily gain in seven weeks, as the French 10-year yield fell 11.4 basis points to 4.7506%. The dollar index dropped 0.32% to 101.83.
1. Euro rebounds
The euro rebounded on Tuesday after falling to a 17-month low the previous day, as lower French government bond yields eased concerns about strain in euro zone debt markets. The currency was up 0.35% at $1.126, while the dollar index fell 0.32% to 101.83.
2. French yields retreat
An early drop in energy prices helped French bonds rally, with the 10-year yield down 11.4 basis points to 4.7506%. The euro had come under pressure as French politicians struggled to curb the budget deficit ahead of a divisive 2027 election; pressure on the currency was also heightened by Spain's snap election.
3. Rate outlooks diverge
The yen weakened against the dollar, which rose 0.11% to 158.08 yen. The Bank of Japan may signal this month that underlying inflation has roughly reached its 2% target, while markets priced in a 19% chance of a Federal Reserve rate hike in October, down from 51% a week earlier, and an 86% chance of a hike in December.
