The euro rebound gathered support in early Asian trading on October 16, 2026, as the dollar headed for its first weekly decline in five weeks. The common currency traded at $1.1210, recovering from a 17-month low as falling US Treasury yields and concerns about artificial intelligence investment interrupted the dollar’s recent advance.
Key Takeaways
- The dollar index was heading for a 0.14% weekly decline after four consecutive weekly gains.
- AI financing concerns spread from stocks into credit, while investors bought US Treasuries.
- The Australian dollar bucked the broader trend after a weak September employment report.
Table of Contents
- Euro rebound offers limited relief after five-week slide
- Australian dollar diverges as employment falls
- Fed speech remains ahead of the early trading snapshot
- Conclusion
Euro rebound offers limited relief after five-week slide
The euro had lost more than 3% against the dollar over the preceding five weeks amid concerns about France’s growing debt burden and a winter energy squeeze. Friday’s recovery therefore offered some relief without reversing most of that decline.
The dollar index, which measures the US currency against six major peers, stood at 102.07. Meanwhile, the US 10-year Treasury yield was on course for its largest weekly fall in more than a year as investors moved into government bonds.
The shift coincided with sharp losses in AI shares and pressure in parts of the credit market. Investors were questioning whether data-center operators could become profitable quickly enough to meet their debt obligations.
Spectra Markets President Brent Donnelly argued that a substantial reassessment of the AI capital-spending boom would weaken the dollar. His view centered on the risk that investors would unwind crowded bets on the US currency; it was a market assessment, not an established forecast.
| Item | Details |
|---|---|
| Japanese yen | 158.13 yen per US dollar; the dollar was down 0.2% for the week. |
| Sterling | $1.3270 per pound; up 0.3% for the week. |
| New Zealand dollar | $0.5621; on course for a weekly gain of 0.1%. |
Australian dollar diverges as employment falls
The Australian dollar was flat at $0.6921 in early trading but headed for a weekly loss of 0.8%. Thursday’s soft jobs figures prompted markets to reduce expectations for another Australian interest-rate increase.
The Australian Bureau of Statistics’ September labour-force release showed seasonally adjusted employment falling by 39,300 and participation declining by 0.2 percentage points to 66.8%. The bureau cautioned against placing too much weight on short-term changes and said trend data better captured underlying labour-market conditions.
Sterling, by contrast, was heading for a weekly gain after data showed Britain’s economy grew an unexpected 0.1% in August. The New Zealand dollar also remained on course for a small weekly advance.
Fed speech remains ahead of the early trading snapshot
Federal Reserve Chair Kevin Warsh was scheduled to speak in Bangkok at 0330 GMT on October 16 at the International Monetary Fund’s annual meeting. His remarks were still ahead at the time of these currency prices.
CME FedWatch pricing put the probability of unchanged rates later in October at 72%, compared with 53% a month earlier. Rate-increase expectations had risen after a hotter-than-expected US inflation reading that week, then eased after Fed officials indicated they could wait for greater clarity.
Commonwealth Bank of Australia currency strategist Carol Kong said any hints about Warsh’s preferred October outcome could move both interest-rate expectations and the dollar.
Conclusion
The euro’s recovery remained modest relative to its preceding losses. Warsh’s scheduled Bangkok speech was the next immediate event to watch for signals on the Fed’s October decision.
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