US Dollar: Safe-haven role questioned as AI story weighs – ING

FXStreet Insights Team FXStreet

ING strategist Francesco Pesole notes that recent equity sell-offs driven by higher Oil prices and AI concerns have pushed investors toward the Japanese Yen (JPY) and Swiss Franc (CHF), undermining the Dollar’s traditional safe-haven role. He highlights falling US yields and reduced expectations for aggressive Federal Reserve (Fed) tightening, while still seeing limited scope for deeper USD losses if risk sentiment stabilizes and US PMIs stay in expansion.

Dollar loses ground to classic havens

"Yesterday was a rough session for risk sentiment, as global equities sold off on a combination of higher oil prices and AI-related concerns. FX moves confirmed that the dollar is far from the preferred safe haven at this stage, with the yen and Swiss franc emerging as the main beneficiaries of the defensive rotation."

"Crucially, the negative correlation between bonds and equities is reasserting itself, and FX markets are taking their cues from that dynamic. 10yr Treasuries broke back below 5.0% for the first time in a month, showing ever-reduced sensitivity to higher oil prices. The same dynamic is visible at the front end, where the 2yr SOFR swap rate dropped 15bp to 4.50% yesterday."

"Still, the bar for pricing out a December Fed hike appears fairly high, which should prevent larger USD corrections for the moment. Any stabilisation in risk sentiment can help USD consolidate across most pairs and take some shine off JPY and CHF. But the FX reaction function to further risk sell-offs is now looking much clearer."

"On the data side, focus will be on S&P Global PMIs today. Consensus is for some softening in the US figures, which, however, remain deep into expansionary territory."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold holds above $4,000/three-month low as Fed hike bets and firm USD cap upside

Gold struggles to capitalize on its modest recovery from levels below the $4,000 psychological mark, or a three-month low set earlier this Friday, and retains a bearish tone through the first half of the European session. Federal Reserve officials recently signaled there is no urgency to raise interest rates. Traders, however, are still pricing in around an 80% chance that the US central bank will raise borrowing costs again at its December policy meeting.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

US S&P Global PMI expected to show moderating business activity in October

The United States S&P Global preliminary Purchasing Managers Indices for October will be released on Friday, providing fresh insights into the health of the world's largest economy ahead of next week's Federal Reserve monetary policy meeting. The report includes the Manufacturing PMI, Services PMI and Composite PMI, which measure business activity across the private sector.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.