The US dollar strengthened Friday on safe-haven demand after a broad selloff in AI stocks worldwide, though falling Treasury yields limited gains ahead of the US non-farm payrolls report.
Asia's tech-heavy markets declined following the steepest drop in US stocks since April 2025, driven by concerns over tighter scrutiny of the AI industry, particularly data centre construction. The flight to safety pushed the two-year US Treasury yield down about 10 basis points to its lowest since September 10, while the 10-year yield fell nearly 6 basis points before rebounding.
"The dollar is getting some support from safe-haven demand," said Dilin Wu, research strategist at Pepperstone. "That could keep it relatively firm against some Asian currencies, although falling Treasury yields may limit the upside."
The Japanese yen hit a one-week high of 157.27 per dollar before settling at 157.8 by midday, while the 10-year Japanese government bond yield fell 9 basis points to 2.665%, its lowest since June 30. China's 10-year sovereign bond yield also fell to near a record low.
The euro fell 0.2% to $1.1198 but is on track for a 0.4% weekly gain. Sterling declined 0.1% to $1.3433 after the Bank of England raised its policy rate as expected. The dollar index rose 0.3% to 101.74.
Fed funds futures scaled back the probability of a December rate hike to around 70% from more than 80% on Wednesday. Initial jobless claims fell 6,000 to a seasonally adjusted 189,000, matching a 57-year low from July.
Investors should watch the dollar index, EUR/USD, USD/JPY, and US Treasury yields, particularly the 10-year at 4.8531%, as Friday's payrolls data and any reversal of rate-cut expectations could drive near-term currency moves.