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The single currency hovered near $1.1200, remaining severely hobbled after dropping to its lowest level since May in earlier sessions. The euro's persistent weakness reflects a broader liquidation of French sovereign assets that has sent shockwaves across European debt and foreign exchange bourses throughout the week.

The U.S. Dollar Index held firm around 102.30, consolidating near 18-month peaks after a 0.3% gain on Wednesday. Meanwhile, the Japanese yen traded flat to slightly weaker around 158.17 per dollar, trapped between rising global bond yields and domestic fiscal intervention warnings.

French fiscal shadow dominates Euro trajectory

Forex trading desks highlight that the euro's five-week downward drift is rooted in deep structural fears surrounding France's budget deficit, which is projected to reach 5.4% of GDP - well above the European Union's 3% limit.

Analysts at DBS noted that French fiscal headwinds remain the primary anchor on the single currency, with international investors demanding an elevated risk premium to hold Eurozone exposure.

Bank of France Governor Emmanuel Moulin emphasized on Wednesday that while France's fiscal position is "serious," the remedy must come from domestic budget consolidation rather than European Central Bank intervention - effectively telling markets that the ECB will not step in to artificially suppress French borrowing costs.

The ongoing liquidation of French paper has pushed 10-year OAT yields toward 4.90% and blown spreads over German Bunds past 140 basis points, spilling over into Italian and Greek debt while keeping the euro firmly pinned to the floor.

"France's widening borrowing premium over Germany reflects concerns about fiscal credibility and the ability to support its debt burden," said Luke Davis, founder & chief market strategist at Bull Market Blueprint.

The ECB is set to publish the account of its recent monetary policy meeting, with traders scanning the readout for insight into how policymakers weigh rising energy inflation against widening sovereign bond spreads.

ECB Chief Economist Philip Lane is scheduled to speak later in the day, with markets watching closely for further commentary on whether tighter financial conditions will limit the need for additional rate hikes.

Hawkish Fed minutes anchor greenback momentum

Providing underlying structural support to the dollar, minutes from the Federal Reserve's September meeting revealed that a majority of US central bank officials still viewed inflation as the paramount threat to the macroeconomic outlook.

While the readout confirmed division over the timing of future moves, it reinforced expectations that the Fed will hold rates steady at its October 28 meeting before potentially delivering another 25-basis-point hike in December.

According to CME FedWatch data, money markets reflect an 81% probability of an October pause, though expectations for a December rate hike remain firmly entrenched above 84%.

"The minutes suggest US financial conditions give the Fed room to keep hiking," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman.

Adding to the dollar's yield advantage, the New York Fed reported that one-year U.S. inflation expectations rose to a three-year high of 3.9% in September, reinforcing the "higher-for-longer" rate narrative.

Yen Constrained Near 158 Despite Solid External Data

Japan's current-account surplus reached ¥4.062 trillion in August, handily beating the ¥3.19 trillion consensus forecast and underlining a robust external trade balance.

Despite the trade buffer, the yen failed to gain traction as Bank of Japan policymakers remain divided over the timing of their next rate hike. Furthermore, market concerns over prospective fiscal spending packages in Tokyo - coupled with 10-year U.S. Treasury yields holding above 5.30% - continue to favor the dollar in interest rate differential plays.