Dollar dips as traders weigh Iran, AI risks
SPY•The dollar index fell 0.25% to 101.71 as traders weighed tensions involving Iran, falling oil prices and concerns about the durability of capital inflows into US AI companies. The euro rose 0.22%, while the yen gained after record demand at a Japanese government bond auction.
1. Dollar slips
The dollar fell on Tuesday alongside oil prices and longer-dated Treasury yields as traders assessed rising tensions in the US war with Iran and the durability of capital inflows into US AI companies. The dollar index declined 0.25% to 101.71. Oil prices retreated after reaching a five-month high.
2. AI concerns return
A 32% plunge in shares of South Korean AI services firm Elice Group in its Seoul debut renewed concerns about AI-linked inflows. Strong investment in US AI stocks has supported the dollar, while higher interest rates tied partly to growth and inflation expectations have also helped. Nomura strategist Dominic Bunning said there is a threshold at which higher rates could cause the AI trade to unravel.
3. Other currencies move
The euro rose 0.22% to $1.1235, though traders remained wary as France faced protests and fiscal strains. Sterling gained 0.59% to $1.338 after UK labour market data surprised to the upside. The yen rose 0.21% to 158.14 per dollar after record demand at a 20-year Japanese government bond auction, while the Canadian dollar reached a nearly one-month high after Alberta voters rejected separation.
