Yen set for biggest daily gain in a month as oil, AI and France worries lift safe-haven demand

New York, Oct 22: The Japanese yen was on track for its strongest daily gain in almost a month on Thursday as investors sought safe-haven assets amid fragile equity markets, elevated crude oil prices linked to the prolonged Middle East conflict and concerns about future returns from artificial intelligence.

The US dollar rose against the euro as worries about social unrest in France and the country’s deteriorating fiscal outlook outweighed concerns about the AI trade, which had pushed US stocks lower.

Yen approaches 160 level

The yen strengthened 0.75% to 156.96 per dollar. Some of the gains may also have reflected the currency’s approach towards the key 160 level, which investors believe could increase the likelihood of intervention by Japanese authorities.

Kevin Ford, lead FX and macro strategist at Convera, described this as the “intervention premium”, noting that speculation about official intervention tends to increase whenever the yen approaches the 160 level.

Against the Swiss franc, another traditional safe-haven currency, the dollar weakened 0.42% to 0.821 francs. The dollar index, which measures the US currency against a basket of currencies including the yen and euro, fell 0.08% to 101.60. The euro slipped 0.09% to $1.1222.

Oil, AI and France in focus

Oil prices climbed about 3% to a five-month high after Houthi attacks in Saudi Arabia raised concerns about further disruptions to energy supplies from the key exporting region.

“AI is making people nervous, as is oil ... and as is France,” said Chris Scicluna, head of economic research at Daiwa Capital Markets.

The dollar has become increasingly sensitive to capital flows and growth and inflation expectations associated with the AI trade. It fell the previous week as concerns about the AI outlook intensified. On Thursday, however, worries about France outweighed those concerns.

Erik Nelson, global head of FX strategy at Wells Fargo, said competing concerns over US AI-related credit and France’s sovereign credit quality had driven recent currency movements. He added that the euro was likely to underperform while France remained a greater concern than US AI-related credit risks.

French President Emmanuel Macron said on Thursday that “illegitimate” protests would be banned in the coming days. He blamed “seditious” ultra-left groups and vandals for the previous weekend’s riots and looting.

For currency markets, the mix leaves the dollar exposed to shifts in AI sentiment and French political risk, with the yen drawing safe-haven demand as oil and equity markets remain unsettled.