SINGAPORE (REUTERS)

The US dollar lingered near a two-week high on Friday as investors unwound risky bets following a deep rout in stocks driven by AI-spending concerns, while the yen firmed ahead of a national election on Sunday.

The dollar has strengthened since President Donald Trump nominated Kevin Warsh as the next Federal Reserve Chair last week, as markets expect him not to push a lot for rate cuts, easing some worries about central bank independence.

The sharp selloff in technology stocks this week comes as investors fret about ​the massive spending on artificial intelligence, as well as the cascading impact of fast-advancing AI tools that could upend various sectors.

The risk aversion has helped the dollar despite US Treasury yields sliding after economic data pointed to a weaker-than-expected jobs market ahead of next week's highly anticipated payrolls report for January.

The dollar index, which measures the US currency against six other units, eased 0.2% to 97.759, hovering near the highest since January 23. The index is set for a 0.6% increase for the week, its steepest ​rise since early January.

ING economists said an apparent slowdown in hiring suggests the Fed may have acted a little prematurely in downplaying the risks to the jobs aspect of its mandate at its January policy meeting.

Yen Finds Footing Ahead of Election

The ​yen strengthened to 156.83 per dollar ahead of a national election ‍over the weekend, where a victory for Prime Minister Sanae Takaichi could be on the cards.

The vote has investors on edge because fiscal worries have sparked a stomach-churning selloff in the currency and bond markets, and a further leg lower would likely reverberate globally.

The yen is poised for a more than 1% decline for the week, its biggest drop since October.

The yen has languished at a near 18-month low against the dollar, prompting Japanese ​policymakers to repeatedly threaten action - code for intervention in markets - to defend the frail currency.

 

The euro firmed to $1.1799 after the European Central Bank ‍left interest rates on hold as expected on Thursday and played down the impact of dollar moves on its future decisions.

Sterling recouped some of its losses and was up 0.37% at $1.3575 after sliding nearly 1% in the previous session.

 

The Bank of England kept interest rates on hold on Thursday, but only after an unexpectedly narrow 5-4 vote, and said borrowing costs are likely to fall if an expected drop soon in inflation is sustained.

In the crypto market, bitcoin was more than 4% firmer at $65,934 in ‌choppy trading.

It had earlier hit its lowest since October 2024 at $60,017 and was set for a 14% decline for the week, the steepest drop since November 2022.