Dollar Set for First Weekly Decline in Five Weeks
The US dollar was heading for its first weekly decline in five weeks on Friday. Concerns about artificial intelligence (AI) investments and falling US Treasury yields weakened demand for the currency. Meanwhile, the euro recovered from a 17-month low. Investors turned to government bonds amid market stress.
During Asian trading, the dollar fell 0.2% against the yen for the week, reaching 158.13. It also declined around 0.1% against the euro, which traded at $1.1210. Meanwhile, the dollar index stood at 102.07. The index measures the dollar against six major currencies and was heading for a 0.14% weekly decline.
Previously, the dollar had gained for five consecutive weeks. During that period, the euro fell more than 3% against the dollar. Concerns about France’s growing debt burden and potentially higher winter energy costs weighed on the euro.
AI Investment Concerns Weigh on the Dollar
The latest market shift followed a sharp decline in AI-related stocks. Investors worried that data-center operators might struggle to generate enough profit to repay their debts. As a result, those concerns spread from equities into parts of the credit market.
Investors responded by buying US Treasury securities. Consequently, Treasury yields fell.
The dollar had also benefited from optimism about the AI boom and its contribution to the US economy. However, investors may now reassess that outlook. If confidence weakens further, the dollar could lose some support.
Brent Donnelly, president of Spectra Markets, said a serious repricing of the AI capital-expenditure boom would hurt the dollar. His comments reflected concerns about investor positions. In particular, investors might reduce positions built around expectations of continued AI-related spending.
Traders Watch Federal Reserve Signals
Sterling held steady at $1.3270 and was heading for a 0.3% weekly gain. Meanwhile, data showed that Britain’s economy unexpectedly grew 0.1% in August. This result supported the pound.
The New Zealand dollar was also heading for a weekly gain of around 0.1%, trading at $0.5621. However, the Australian dollar moved in the opposite direction.
It was heading for a 0.8% weekly decline. Weaker-than-expected employment data prompted traders to lower their expectations for another interest-rate increase by the Reserve Bank of Australia.
Meanwhile, investors were watching a speech by Federal Reserve Chair Kevin Warsh at the IMF annual meeting in Bangkok. According to CME FedWatch data cited by Reuters, markets saw a 72% probability that the Fed would leave interest rates unchanged at its next meeting. A month earlier, that probability stood at 53%.
