Dollar climbs on safe haven demand as AI rout saps Asian markets

On Friday, the dollar climbed against other major currencies due to increased demand for safe-haven assets as the sell-off in AI stocks spread worldwide and investors awaited a US payrolls report. Tech-heavy markets in Asia suffered significant losses throughout the day, with European markets following suit. In contrast, the US stock market had its worst decline since April 2025, as investors grew wary that significant Democratic gains in the upcoming midterm elections could intensify scrutiny of the AI industry and curb data center construction.

Analysts noted that the dollar's strength was driven by investors flocking to US treasuries and short-dated securities, rather than the weakening seen during a tech stocks sell-off in October. Chris Turner, global head of markets at ING, explained that the rotation into cash rather than a move away from the dollar was evident. The safe-haven Japanese yen and Swiss franc also experienced gains on Friday, but as Asian stocks continued to falter, the dollar made gains against most major currencies.

Against the dollar, the euro decreased by 0.4% to $1.1171, while the British pound dropped nearly 0.5% to $1.338. The dollar also gained 0.4% against the Japanese yen at 158.2 and 0.2% against the Swiss franc at 0.8179. The overnight safe-haven flight caused the two-year US Treasury yield to drop by around 10 basis points to its lowest level since September 10, while the 10-year yield declined nearly 6 basis points, steepening the yield curve.

Early European trading on Friday showed a calmer market, with both the 10-year and 2-year yields remaining flat at 4.84% and 4.48%, respectively. The Australian and New Zealand dollars, typically influenced by global growth and equity markets, experienced the most significant declines among developed currency markets. The Australian dollar fell 0.76% to 0.6875, and the New Zealand dollar dropped 0.8% to 0.5546.

The next major event on the horizon is the US non-farm payrolls report, which investors will closely monitor to gauge the Federal Reserve's interest rate path.