Yen jumps as oil, AI and France worries rattle markets

"AI is making people nervous, as is oil ... and as is France," said Chris Scicluna, head of economic research at Daiwa Capital Markets. Oil prices climbed about 3% to a five-month high after Houthi attacks in Saudi Arabia stoked concerns of further disruption to energy supplies from the key exporting region. The Japanese yen strengthened 0.75% to 156.96 per dollar. Some of the move in the yen may also be due to its approaching the key 160 level, which is seen as increasing the odds of further intervention by Japanese authorities to shore up the currency.

Kevin Ford, lead FX and macro strategist at Convera, called it "the intervention premium," noting that "every time the yen gets closer to the 160 line, that's where there's higher speculation that the central bank will intervene." Against the Swiss franc, another traditional safe haven, the dollar weakened 0.42% to  0.821 francs per dollar. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.08% to 101.60, with the euro down 0.09% at $1.1222.

The dollar has become increasingly tied to capital flows and to growth and inflation expectations linked to the AI trade. It fell last week as fears over the AI outlook grew. On Thursday, however, concerns about France outweighed those fears. "You have these competing stories and weak points between US AI-related credits and then France's sovereign credit, and we've seen this push and pull in the last couple of days where at times one is more of a concern than the other,” said Erik Nelson, global head of FX strategy at Wells Fargo.

“As long as France is more of a concern than US AI credits, then you're going to see the euro underperform.” French President Emmanuel Macron said on Thursday that "illegitimate" protests would be banned in the coming days and blamed "seditious" ultra-left groups and vandals for last weekend's riots and looting. Concerns about France's ability to manage its huge debt burden have hurt French government bonds and raised worries about other heavily indebted euro zone countries.

The spread between France and Germany's 10-year note yields reached 177.7 basis points on Thursday, the widest gap since 2011. Sterling strengthened 0.05% to $1.3401. The Australian dollar  weakened 0.11% to $0.7019. In cryptocurrencies, bitcoin fell 4.27% to $81,023. (Additional reporting by Amanda Cooper and Tom Westbrook; Editing by Xevi Fontdegloria and Andrea Ricci )