Dollar remains near two-week high as investors flee risky assets amid AI tech selloff, with yen gaining ahead of Japan’s national election
The U.S. dollar remained near a two-week high on Friday as investors fled risky assets following a sharp global stock selloff driven by concerns over heavy artificial intelligence (AI) spending.
Tokyo also saw gains for the Japanese yen ahead of a national election on Sunday that could reshape fiscal policy.
Markets have been buoyed by expectations that Kevin Warsh, nominated as the next Federal Reserve Chair, will avoid aggressive rate cuts, reinforcing the dollar’s appeal as a safe-haven currency.
The dollar index, tracking the currency against six major peers, slipped 0.2% to 97.759 but remained near its highest level since January 23, set for a 0.6% weekly rise, the steepest since early January.
Investors cited multiple risks, including Big Tech capital expenditure scrutiny, AI-driven disruption, and liquidity constraints, leading to widespread de-risking across asset classes.
Saxo chief investment strategist Charu Chanana described the market as undergoing a “positioning flush” as sentiment shifted from risk-on to risk-off.
The Japanese yen strengthened to 156.83 per dollar ahead of the election, though it remains near an 18-month low against the greenback.
Analysts warn that an electoral victory for Prime Minister Sanae Takaichi could spur expansionary fiscal policies, adding uncertainty to bond and currency markets.
Other currencies were mixed.
The euro firmed to $1.1799 after the European Central Bank maintained rates, while sterling recovered to $1.3575 following a near-1% drop.
Bitcoin rebounded above $65,900, though it is on track for a 14% weekly decline, the largest since November 2022.
The market remains focused on U.S. payroll data and central bank policy, with economists noting that weaker hiring could prompt a reconsideration of interest-rate decisions later in the year.
