The euro extended its rebound from a 17-month low as the US dollar headed for its first weekly fall against it in more than a month. Falling Treasury yields and worries over AI-related investment shaped the move, while the Federal Reserve's next step stays uncertain.
The euro was up 0.14% to $1.1235 after climbing 0.56% on Thursday, its biggest daily rise in two months. The currency was on track for a 0.39% weekly gain. Its rebound extends from a 17-month low hit earlier this week.
Dollar slips as AI worries shift Fed bets
The dollar was set for its first weekly fall in more than a month against the euro and the yen, as investors turned to the US rate outlook and concerns about an escalation of the Iran conflict faded. The dollar index fell 0.25% to 101.77 and was set for a 0.45% weekly decline.
However, AI stocks cratered this week and the stress spread to parts of the credit market, as investors worried data centre operators might not turn profitable in time to pay their debts. Analysts noted that Wednesday's moves may preview how currencies would react to a major AI-driven selloff, with the dollar falling instead of drawing safe-haven demand.
Meanwhile, a separate Investing.com report said the benchmark 10-year Treasury yield fell to around 5.08%, its lowest since Sept. 23. That decline weakened the dollar's appeal as investors sought the relative safety of government bonds.
Fed path still limits conviction
The bond rally supported the euro by reducing the dollar's yield advantage, but uncertainty over the Fed's next move continued to limit conviction in foreign-exchange markets. Markets priced a roughly 28% chance of a rate hike this month and a 66% probability of a rate hike in December, according to CME FedWatch.
Not every strategist expects the dollar to keep sliding. Chris Turner, forex strategist at ING, said: "expect the dollar to consolidate near recent highs", barring another big leg down in AI stocks and risk assets in general.
Investors were also watching for signals from Fed Chair Kevin Warsh at an International Monetary Fund event in Bangkok.
Sources: Economy News, Forex News
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