Investing.com — The U.S. dollar slipped on Thursday, as a steep sell-off in the artificial intelligence trade on Wall Street drove institutional allocators towards liquid duration and non-dollar currencies. The safe-haven Japanese yen caught a bid, rising to a five-week high against the greenback.
Currency market participants were also gearing up for latest interest rate decisions next week from the Federal Reserve, the European Central Bank (ECB), and the Bank of Japan (BOJ).
The U.S. dollar index, which tracks the world’s premier currency against a basket of six major peers, dipped 0.2% to 101.61.
U.S. investors seek safe havens
With this week’s U.S. economic calendar light and the Fed in a blackout period, the catalysts for the dollar were limited to moves in oil prices, the bond market, and on Wall Street. Friday was a classic risk-off session, with investors dumping high-growth communication services and technology stocks and flocking to the safety of defensive sectors and U.S. Treasuries.
The decline was led by elevated jitters around the massive amounts of debt being issued by companies to fuel their AI infrastructure buildouts. Meta Platforms, one of the premier AI hyperscalers, in its latest quarterly report indicated a slight rise in capital spending forecasts, while also announcing the establishment of a new class of nonvoting stock to raise capital for its AI ambitions.
Among currencies, the U.S. dollar, which can be heavily affected by capital spending concerns, was shunned for the traditional safety of the Japanese yen.
The focus is now on quarterly reports from other AI hyperscalers next week, along with the Fed’s October interest rate decision. The Federal Open Market Committee (FOMC) is widely anticipated to hold rates steady, and eyes will be on Chair Kevin Warsh’s press conference.
“Warsh is likely to signal that recent inflation data reinforce expectations from the September meeting that further tightening will likely be needed over time,” Deutsche Bank analysts led by Matthew Luzzetti said.
“However, skipping October allows officials more time to assess trends in the data. In the wake of the July press conference, which triggered concerns about the Fed’s commitment to price stability, Warsh will want to avoid any indications that the Fed is unwilling to take appropriate action against sticky inflation,” they added.
