US dollar nudges lower as AI, Mideast worries ease

On Monday, November 9, the US dollar experienced a slight decline after achieving its largest increase in nearly six months on the previous Friday. This upward movement was driven by impressive US jobs data that increased expectations for higher interest rates, coupled with improved market sentiment at the beginning of the week.

The dollar also found support from a decline in artificial intelligence stocks at the end of last week, prompting investors to turn to safer assets. However, concerns about AI stocks eased on Monday as investors reacted to comments from US President Donald Trump, who dismissed the possibility of renewed strikes on Iran. This eased the market's jitters over AI-related risks.

The US dollar index, which gauges the currency against six major counterparts, slipped by 0.3% to 101.88. Despite this, it remained slightly below the levels reached on Friday, when the dollar surged almost 0.8% following stronger-than-anticipated jobs data. According to Francesco Pesole, an FX strategist at ING, the rally in the dollar requires the risk-averse mood to continue throughout the week.

Otherwise, there is a possibility of a moderate correction, as the move on Friday seemed somewhat excessive relative to short-term market drivers. Pesole also highlighted that macroeconomic conditions should prevent the dollar from reaching last week's lows, pointing to upcoming US consumer inflation data, which is scheduled for Tuesday.

Meanwhile, the euro saw a 0.4% increase, trading at $1.1187 following a 0.7% decline on Friday. It had dropped to as low as $1.1132, the weakest level since May 2025. The British pound rose 0.5% to $1.3411, while the yen eased 0.3% to 157.99 yen following the dollar's 0.6% gain on Friday. The risk-sensitive currencies of Australia and New Zealand also rallied on Monday after experiencing a pullback at the end of last week.

The Australian dollar surged 0.5% to $0.6899, while the New Zealand dollar jumped 1% to $0.5602, as traders considered the implications of closely contested elections in New Zealand.

Looking ahead, the US consumer price index data expected to be released on Tuesday is anticipated to show a monthly increase of 0.3%, according to a Reuters survey. This data could reinforce the outlook for a December Federal Reserve rate hike. Pesole noted that futures markets imply an 81% probability of a rate increase on December 9, which is higher than the 73% probability from the previous week.

The recent surge in bets for Fed tightening in December was tempered by the decline in global technology stocks, as investors grew concerned about the prospects for AI investment, profitability, and regulation, especially after Democrats' victory in the US midterm elections earlier in November. Barclays strategists observed that AI-related uncertainties posed a challenge to the dollar's attractiveness, but economic data has consistently surpassed expectations, supporting the dollar's appeal.