Dollar climbs on safe haven demand as AI rout saps Asian markets

By Alun John

LONDON, Nov 6 (Reuters) - The dollar gained against other major currencies on Friday, drawing support from safe-haven demand as the selloff in AI stocks spread worldwide and the markets awaited a US payrolls report.

Asia's tech-heavy markets fell heavily on Friday, and selling broadened in Europe. 

The previous day, US stocks declined by the most since April 2025 as investors anticipated that huge Democrat gains in the US midterm elections this week would increase scrutiny of the AI industry and limit data centre construction.

But while the dollar weakened in a previous tech stocks selloff in October, that was not the case on Friday. Analysts said the turbulence instead was pushing investors into US treasuries and short-dated securities. 

"It seems that global investors are more than happy to leave their cash in dollars for the time being. In other words, we are seeing a rotation into cash and not out of the dollar," said Chris Turner, global head of markets at ING. 

"Helping that story is the return to more familiar correlations, where US Treasuries are now performing their safe haven role."

The safe-haven Japanese yen and Swiss franc rallied on Thursday, but as Asian stocks came under pressure on Friday, the dollar made gains against most major currencies.

Against the dollar, the euro was last down 0.4% at $1.1171 and sterling shed nearly 0.5% at $1.338.

The dollar was also up 0.4% on the yen at 158.2 and 0.2% on the franc at 0.8179. 

The overnight flight to safety drove the two-year US Treasury yield, which is sensitive to interest rate expectations, down about 10 bps to its lowest since September 10. The 10-year yield fell nearly 6 bps, steepening the yield curve.

Early on Friday in European trading the mood was calmer, with 10-year and 2-year yields both flat at 4.84% and 4.48%, respectively.

The biggest fallers in developed currency markets were the Australian and New Zealand dollars, which traders regard as geared to global growth and equity markets. 

The Aussie fell 0.76% to 0.6875 and the kiwi shed 0.8% to 0.5546. 

NON-FARM PAYROLLS

Next on the agenda will be Friday's US non-farm payrolls report from which investors will try to gauge the Federal Reserve's interest rate path. Data on Thursday offered an upbeat prelude as weekly initial jobless claims fell by 6,000 to a seasonally adjusted 189,000, matching a 57-year low in July and below the 196,000 estimate in a Reuters poll of economists.

"A decent jobs number today will confirm the Fed's understanding that the US jobs market is solid and could provide some support to short-dated rates and the dollar," said Turner. 

Fed expectations this week have also been shaped by the tech selloff that has contributed to a tightening of financial conditions and could mean the Fed has less to do to keep inflation in check, analysts said. 

Fed funds futures scaled back the probability of a 25-basis-point interest rate hike in December to around 65% from more than 80% on Wednesday.

(Reporting by Alun John in London, Li Gu in Shanghai and Ankur Banerjee in Singapore; Editing by Christopher Cushing, Christian Schmollinger and Barbara Lewis)