Dollar falls as 'AI-related jitters' hit market sentiment

Matthew Ryan, CFA Ebury

The Dollar fell sharply on Tuesday afternoon before recovering most of its losses, a sign that any positive Iran war news, even unfounded, still weighs heavily on the greenback.

Renewed AI-related jitters did not help the dollar’s cause. The latest move appears to have been driven by a poor IPO opening for South Korean AI firm Elice, which sank more than 30% on its stock market debut yesterday.

We would not read too much into a single poor IPO, and expect bouts of AI-related anxiety to prove temporary while the broader investment case remains intact.

That said, markets clearly remain sensitive to even modestly bad news here and the dollar, which is now an effective proxy for AI market sentiment, could see further mild downside in the near-term should these fears persist.

With the FOMC now in its customary pre-meeting blackout period, we won’t be hearing from Fed officials at all this week. The economic calendar is also relatively light in the next couple of days, though we will be keeping close tabs on the October PMI figures on Friday.

While an October hike from the Fed is now effectively off the cards, another strong read on business activity here should cement calls for a US rate increase in December.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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