Yen hits one-month high as AI spending doubts drive safe-haven flows
The Japanese yen rose to its strongest level in more than a month on Friday, lifted by safe-haven demand as fresh doubts over the sustainability of the AI spending boom drove investors out of riskier assets, according to market data cited in the report. The yen gained 0.3% to 156.28 per dollar and was set for a 1% weekly rise, its best week since early September.
The risk aversion also pushed US 10-year Treasury yields to near a one-month low of 4.953%, after a sharp fall on Thursday when equities sold off. The dollar index stood at 101.52, having touched 101.44 on Thursday, its lowest since the start of the month. ING analysts said they still expect the 10-year yield to return above 5% given inflation, fiscal deficit and AI trends, and cautioned against adding duration exposure just yet.
Oil added a separate layer of pressure, with Brent futures above $114 per barrel after Houthi attacks in Saudi Arabia raised concerns about disruption to regional energy supplies. OCBC analysts said the beneficiaries of safe-haven demand differ by risk: AI jitters favour the yen, Middle East tensions support the Canadian dollar and Norwegian crown through higher oil prices, while French fiscal stress benefits the Swiss franc. They added that AI has become an increasingly two-way macro risk for the dollar.
The yen's move comes ahead of the Bank of Japan's policy meeting next week. Data on Friday showed Japan's annual core consumer inflation exceeded the central bank's 2% target in September for the first time in nine months, which the report described as a sign of broadening price pressure that strengthens the case for a near-term rate hike. A majority of economists polled by Reuters expect a hold next week followed by a quarter-point hike in December.
Elsewhere, the Canadian dollar firmed past C$1.40 against the greenback to a one-month high, the Swiss franc held near its firmest level in a month at 0.8199 per dollar, and China's offshore yuan was little changed at 6.6715, its strongest in more than four years. The euro was flat at $1.122, weighed by concerns over France's debt burden, with the European Central Bank expected to hold its benchmark rate at 2.5% next week.
