The U.S. dollar fell the most in over a month on Thursday, erasing recent gains driven by hotter-than-expected inflation data. The Bloomberg Dollar Spot Index declined 0.3%, its biggest drop since September 3, as artificial intelligence-related concerns fueled a bond rally that pushed yields lower and weighed on the currency. The greenback slid against nearly all major peers, dropping about 1% against the Swiss franc.
Traders attributed the move to a flight to safer assets like Treasuries as AI debt sold off, pushing yields down and pressuring the dollar despite ongoing inflation pressures. New data showed U.S. producer prices advanced 1.3% in September, the most in over four years, while retail sales also beat forecasts. This follows a better-than-expected consumer inflation report that briefly revived expectations for Federal Reserve interest-rate hikes just a day earlier.
Traders will look to Fed Chairman Kevin Warsh's remarks at the IMF-World Bank meetings in Bangkok for further clues on the central bank's policy path, as the Fed enters a blackout period before its October meeting. While Warsh has vowed not to steer markets with near-term monetary policy, the inflation surprise will likely heighten scrutiny of his remarks. Markets are in a weird place, with investors flocking to safe havens due to AI concerns, though the dollar's close tie to AI spending means sector trouble could ultimately weigh on the currency.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing