Dollar set to slip weekly as AI sell-off rattles markets and rate outlook shifts

Investors are shifting focus from inflation data to the outlook for U.S. interest rates after AI-related stocks plunged this week, dragging the dollar toward its first weekly loss in more than a month. The sell-off has extended to parts of the credit market as participants worry that data-centre firms may not generate enough cash flow to service debt. The dollar index slipped 0.25 % to 101.77, setting up a 0.45 % weekly decline, while the Swiss franc appears set for a 0.61 % weekly gain thanks to its safe-haven status.

The euro rose 0.14 % to $1.1235 and the yen edged up 0.05 % at 157.89, each on track for modest weekly advances. Analysts say the move reflects a more dovish Fed outlook, with markets assigning an 87 % chance that rates will hold steady at the upcoming meeting, and diminishing worries about an Iran-related escalation. Comments from Thierry Wizman of Macquarie Group and Chris Turner of ING highlight the potential for lower U.S. yields if AI investment prospects dim.