Dollar steadies, yen gains as equity selloff drives haven demand before U.S. payrolls

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Dollar steadies, yen gains

Highlights

Nasdaq posts its steepest one-day decline since April 2025 as equity selloff fuels risk aversion and lifts haven currencies like the yen.
Yen spikes 0.2% to a one-week high of 157.40 per dollar, while the Swiss franc also gains 0.2% as the dollar index remains flat at 101.55.
U.S. 10-year Treasury yield drops to 4.84% and fed funds futures now price December Fed hike odds at 70%, down from over 80% midweek.

Market moves before payrolls data

As reported by Reuters, the dollar is holding broadly steady against major peers on Friday after a Democratic sweep in Congress triggered a retreat from risk that hit U.S. stocks and lifted demand for haven assets.

The Nasdaq records its deepest one-day drop since "Liberation Day" in April 2025 on Thursday, while concerns about tighter scrutiny of the artificial intelligence industry, especially around data centre construction, continue to roil global markets this week.

The yen strengthens 0.2% to a one-week high of 157.40 per U.S. dollar before giving back part of the gain, while the Swiss franc firms 0.2% against the U.S. currency. The dollar index, which tracks the greenback against six peers, is roughly flat at 101.55, and the euro stands little changed at $1.1222, though it is on course for a 0.5% weekly rise.

Sterling is last up 0.1% at $1.3457 after the Bank of England raises its policy interest rate as widely expected.

Bond yields and rate expectations shift

The move into safer assets is also pushing Treasury yields lower, with the 10-year yield last at 4.84% in the Asian morning, near its lowest level since September 10. The two-year yield, which is more sensitive to interest rate expectations, falls about 10 basis points overnight to 4.47%.

Traders are also repricing the Federal Reserve outlook, with fed funds futures cutting the probability of a 25-basis-point rate increase in December to around 70% from more than 80% on Wednesday. OCBC analysts say falling U.S. yields are reducing the dollar's safe-haven advantage and leaving the yen as the standout hedge against more U.S.-centric volatility.

Attention now turns to Friday's U.S. non-farm payrolls report, which investors are using to assess the likely path of Fed policy. Weekly initial jobless claims already offer a firm lead-in, falling by 6,000 to a seasonally adjusted 189,000, matching a 57-year low seen in July and coming in below the 196,000 forecast in a Reuters poll of economists.

Our earlier article on UBS Global Wealth Management’s longer Fed tightening-cycle forecast explained why the bank expected additional rate hikes after stronger-than-expected inflation data reinforced “higher-for-longer” risks. We noted that markets were also repricing the policy path via rate futures, as investors weighed persistent price pressures alongside AI-linked demand and other supply-side uncertainties—factors that can feed directly into moves in Treasury yields and the dollar.

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