What happened
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.
Why it moves currencies
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.
Where it shows up
What to watch
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.
Filed in the Library as a Wire lesson →Three more things that moved
Bank of England Raises Rates to 4%, Flags More Hikes
The Bank of England voted 8-1 to lift its policy rate from 3.75% to 4.0%, the first hike since 2023. Governor Bailey said at least one more increase was likely unless the US-Iran conflict eases; one dissenter backed a larger 50bp hike.
Oil Slides on Iran Deal Hopes, Pressures Commodity Currencies
Energy prices have fallen sharply over the past week amid growing optimism that a US-Iran deal could follow the midterm elections. Lower oil and gas prices add an independent headwind for commodity-linked currencies, compounding risk-off pressure on the Australian and Canadian dollars.
Fed December Hike Odds Soften as AI Rout Bites
The AI equity rout has materially tightened US financial conditions, with Fed Chair Kevin Warsh having acknowledged the development at the last FOMC meeting. Markets are pricing around 16 basis points of Fed tightening for December, down from roughly 21 basis points earlier this week.
What's scheduled, in UTC
- 01FX Daily Snapshot: USD reverses US mid-term election losses as AI-equity sell-off intensifies · MUFG Researchmufgresearch.com
- 02Bank of England raises rates for first time since 2023, says more may come · Reutersreuters.com
- 03Pound rises as BoE hikes rates and signals more to come · TorFX Newsnews.torfx.com
- 04AUD plunges as US stocks suffer biggest fall since Liberation Day · Converaconvera.com
- 05Asian Stocks Brace for Selloff as AI Rout Deepens: Markets Wrap · Bloombergbloomberg.com
- 06Market Quick Take: Dow jumps 3% after Democrats sweep Congress · Saxohome.saxo
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