NEW YORK: The dollar declined on Thursday as a rise in euro zone bond yields cooled, while expectations for the path of interest rates from the Federal Reserve this year remained largely intact.
Euro zone government bond yields rose sharply again as a surge in oil prices intensified inflation concerns, with investors continuing to sell bonds of heavily indebted countries such as France and Italy.
But the euro recovered from its earlier lows as yields retreated, with the French 10-year yield little changed at 4.8735 percent after climbing as high as 4.9685 percent on the day.
France has been hit particularly hard as investors scrutinize its debt load, budget deficit and political outlook ahead of the 2027 presidential election.
In Spain, trade unions on Wednesday announced a nationwide general strike over housing issues for November 11, a protest that will take place a few weeks before a snap election.
Meanwhile, expectations for a rate hike from the Fed at its policy meeting later this month remain subdued, after minutes released on Wednesday from the central bank’s most recent meeting showed policymakers viewed inflation as the biggest risk to their outlook, and analysts said they offered no surprises.
US Federal Reserve Governor Christopher Waller said on Thursday that additional rate hikes will likely be needed to lower inflation to the Fed’s 2 percent target, but added there was “flexibility” about the pace of increases and left the door open for a pause at the Fed’s upcoming October meeting.
Waller’s comments echoed those from some other Fed officials last week that signaled a preference for patience in additional rate increases.