Yen Set for Largest Daily Rally in a Month as Risk-Averse Investors Dump Dollar

The yen headed for its strongest daily rally in a month on Thursday, drawing safe-haven flows as investors fretted over fragile equity markets, high crude prices, war in the Middle East and potential disappointment in future returns from AI. The dollar fell 0.6% to 157.27 against the yen, set for its largest drop since late September, as Treasury yields also declined on capital flows into bonds and investors unwound bets on future U.S. rate rises. "AI is making people nervous, as is oil ... and as is France, and obviously we have a slight degree of risk aversion in the market," said Chris Scicluna, head of economic research at Daiwa Capital Markets, citing lower government bond yields in the U.S., UK and Japan. The Bank of Japan is expected to leave rates unchanged at 1.25% next week, with traders pricing a steady series of increases to around 2% by the end of 2027. The euro was steady at $1.1234, with French 10-year yields near their highest since 2002 amid concerns over France's debt burden. Sterling held at $1.3403 after hitting a one-month high of $1.3409.