Dollar holds, yen gains as equity rout saps risk appetite ahead of payrolls

The dollar index remained steady at 101.55 on Friday, as investors sought refuge in haven assets following a significant decline in US equities. This reaction followed a Democratic sweep in Congress, which negatively impacted US stocks on Thursday. Concerns about increased regulation of the artificial intelligence industry further unsettled global markets.

The yen gained 0.2%, reaching a one-week high of 157.40 against the US dollar. The Swiss franc also strengthened by 0.2% against the US currency. Analysts noted that the AI downturn creates conflicting forces for the dollar, while falling US yields diminish its safe-haven appeal, making the yen the most appealing hedge against potential volatility.

The 10-year Treasury yield dropped to 4.84%, close to its lowest since September, reflecting a shift in expectations for Federal Reserve policy. The euro remained flat at USD1.1222 but was expected to rise by 0.5% over the week, recovering from two weeks of declines. Investors are eagerly awaiting the US non-farm payrolls report, which could provide insight into the Federal Reserve's rate-hike trajectory.

Recent data showed a slight improvement in the labor market, as initial jobless claims decreased to 189,000, slightly below expectations.