The US dollar weakened slightly on Tuesday as easing unrest in France helped steady the euro, while stronger-than-expected British labour market data lifted the pound and robust demand for Japanese government bonds supported the yen.
The dollar index, which measures the greenback against a basket of six major currencies, fell 0.1 per cent to 101.85, trading near the lower end of its range for October.
The euro was broadly unchanged at $1.1211 after hitting its weakest level since May 2025 last week at $1.1113. The single currency remains under pressure from concerns about France’s political stability and deteriorating public finances.
French authorities imposed curfews in several cities on Monday in an effort to contain anti-government demonstrations. The unrest has added to uncertainty surrounding President Emmanuel Macron’s final months in office.
Investors are also watching a parliamentary vote on the revenue section of France’s proposed 2027 budget, scheduled for Tuesday. Concerns about the country’s long-term finances have pushed government bond yields higher and weighed on the euro since early September.
Market analysts warned that the political and fiscal challenges facing France could continue to limit the single currency’s recovery.
Pound rises on stronger UK jobs data
The British pound gained 0.3 per cent against the dollar to $1.3347 after fresh labour market figures indicated that the country’s jobs market remained resilient.
The data strengthened expectations that the Bank of England could face renewed pressure to raise interest rates if economic conditions and inflation warrant further tightening.
Higher interest rate expectations can support a currency by making assets denominated in that currency more attractive to investors.
Lale Akoner, global market strategist at eToro, said the stronger labour market could give the Bank of England both the opportunity and justification to consider another rate increase, potentially providing further support for sterling.
The latest figures added to a series of UK economic releases that have exceeded market expectations.
Japanese bond demand lifts yen
The Japanese yen strengthened 0.2 per cent to 158.14 against the dollar, recovering from two consecutive sessions of losses after an auction of 20-year Japanese government bonds attracted record demand.
Bids reached 5.84 times the amount of bonds offered, the highest bid-to-cover ratio since the securities were first issued in 1987.
The strong demand suggested that investors were becoming more willing to hold longer-term Japanese government debt, helping support the yen.
Masahiko Loo, a senior fixed-income strategist at State Street Investment Management in Tokyo, said the auction indicated that investors who had previously held back were returning to the market.
He also noted that Japanese government bonds could be attracting interest as an alternative to assets exposed to political and fiscal uncertainty in Europe, particularly France.
The yen also gained 0.2 per cent against the euro, although it edged lower against the Swiss franc.
Oil prices keep dollar outlook in focus
Energy prices remained a major influence on currency markets, with Brent crude futures trading above $111 a barrel, near a five-month high, amid limited progress towards ending the war involving Iran.
Higher oil prices can support the dollar by increasing demand for the US currency in international energy transactions. However, expensive energy also raises import costs for economies such as those in Europe and Japan, potentially weighing on their currencies.
Analysts warned that a further increase in crude prices could provide additional support for the dollar, even as it weakened slightly during Tuesday’s session.
The direction of the US currency will also depend on changes in interest rate expectations, economic growth and investor demand for safe-haven assets.
Other currencies advance against the dollar
Elsewhere, the Canadian dollar rose 0.5 per cent to 1.4048 against the greenback, approaching its strongest level in nearly a month.
The currency strengthened as Alberta voters chose to remain part of Canada in the province’s first vote on whether to begin the process towards a binding independence referendum.
China’s yuan also advanced, gaining 0.1 per cent to close the domestic trading session at 6.6791 per dollar, its strongest closing level since June 2022.
The latest movements show investors balancing political uncertainty in Europe, improving signals from the UK labour market, demand for Japanese bonds and persistent energy price risks as they reassess the outlook for the dollar and other major currencies.
