Dollar set for weekly loss as Fed hike bets fade, AI clouds outlook
TLT•The dollar was headed for its first weekly loss in more than a month against the euro and yen as expectations for a Federal Reserve rate hike faded and an AI-driven equity selloff weighed on the currency. The dollar index fell 0.42% to 101.61 and was set for a 0.6% weekly decline.
1. Dollar weakens
The dollar fell on Friday, heading for its first weekly loss in more than a month against the euro and yen. Hotter-than-expected consumer and producer price readings initially unsettled markets, but Fed officials’ comments that there was no urgency to tighten policy further helped stabilize Treasury yields and eroded support for the dollar.
2. AI concerns weigh
A sharp selloff in AI stocks spread stress to parts of the credit market, as investors questioned whether data centre operators could become profitable in time to repay their debts. Marc Chandler of Bannockburn Capital Markets said concerns about AI’s sustainability were offsetting the dollar support from interest rates.
3. Rate and currency moves
Markets assigned an 85% probability to the Fed holding rates steady later in the month. The euro rose 0.33% to $1.1255 and was up 0.48% for the week; sterling gained 0.60% to $1.3353, while the dollar fell 0.48% against the Swiss franc to 0.8228 and 0.12% against the yen to 157.79.
