AI Equity Rout Pushes Yen Higher, Australian Dollar to 18-Week Low

The Nasdaq composite fell around 5.5% on Thursday, its steepest single-day decline since April 2025, as investors sold AI-related stocks on fears that the Democrats' midterm sweep would bring tighter technology regulation. Nvidia shed more than 9%. Microsoft separately disclosed it was stepping back from certain data-centre commitments, deepening the sell-off. The sell-off spread to Asian equities, with Japan's Topix and South Korea's Kospi each falling around 6%. The yen briefly strengthened to a one-week high near 157.40 per dollar before drifting back toward 158. Australia's dollar fell to an 18-week low near $0.6914. The DXY dollar index recovered toward 101.70, erasing post-election losses.

When equity markets sell off sharply, traders reduce exposure to risk assets and move capital to safety. The yen is the classic G10 safe haven: Japan runs a persistent current-account surplus, and Japanese investors tend to repatriate overseas funds during periods of stress, buying yen in the process. The Swiss franc operates on similar logic. When both currencies rally at once, it confirms that broad risk aversion, rather than any country-specific worry, is driving markets. The Australian dollar sits at the opposite end of the spectrum. It is a high-beta currency, meaning it tends to amplify global sentiment swings, partly because Australia's economy is closely tied to commodity exports and Asian demand. The dollar's position is more nuanced: it gains from safe-haven demand but loses the AI-investment inflow that had been a structural support this year.

Today's US October nonfarm payrolls at 13:30 UTC are the next decisive test. Markets expect around 65,000 jobs added, up from 29,000 in September; stronger-than-expected ADP and JOLTS data raise the risk of a beat. BoE Chief Economist Huw Pill speaks at 12:15 UTC and could move sterling sharply if he endorses a December follow-up hike.