WSJ Dollar Index rises 0.56% to 97.60 as tech rout boosts haven demand

The WSJ Dollar Index edged lower for a second consecutive session Friday but still closed the week at 97.60, up 0.56% from the prior Friday, as a rotation out of technology stocks boosted demand for the greenback.

"The dollar is catching a safe-haven bid as the Nasdaq suffers its worst weekly decline in months and investors rotate into defensive sectors," said Ross Mayfield, investment strategist at Baird.

The tech-heavy Nasdaq Composite slid 4.6% for the week, its fifth consecutive losing session, while the S&P 500 fell nearly 2%. The Dow Jones Industrial Average outperformed, rising 0.6% over the period, as money rotated out of semiconductor names — Micron Technology dropped more than 6% and Intel shed over 3% — and into healthcare, consumer staples and utilities. Eli Lilly shares gained 7% on the week, while Johnson & Johnson rose almost 4%.

The dollar's modest advance comes as markets reassess the durability of the AI trade following reports that OpenAI is considering delaying its IPO, raising questions about the sustainability of infrastructure spending. Minneapolis Fed President Neel Kashkari said Friday he now expects one interest rate hike this year, citing rising inflation linked to the conflict in the Middle East — a view that, if realized, would further support the dollar.

The WSJ Dollar Index measures the greenback against a basket of 16 major currencies. Its weekly gain of 0.56% snaps a two-week losing streak, though the index remains below the 98 level it traded at in early June.

The dollar's strength was most pronounced against Asian currencies, with the Japanese yen and South Korean won both weakening as the tech sell-off swept across the region. SoftBank Group, a key backer of OpenAI, plunged more than 12% in Tokyo trading Friday, while South Korea's Kospi declined 5.81%.

Better-than-expected consumer sentiment data and an improved inflation outlook lent some support to risk assets Friday, briefly paring dollar gains. But the broader weekly trend reflected a market recalibrating expectations for both growth and monetary policy.

The last time the Nasdaq posted a comparable weekly decline — a 4.6% drop — was in late April, when the S&P 500 fell 1.8% over the same period and the WSJ Dollar Index rose 0.4%. The pattern of tech-led selling and dollar buying has historically persisted for two to three weeks before stabilizing, according to Baird's Mayfield.

For currency markets, the key question is whether the dollar's strength is a temporary safe-haven bid or the start of a more sustained move higher. Markets are now pricing a 62% probability that the Fed holds rates steady at its July meeting, with Kashkari's hawkish comments adding to the case for a stronger dollar in the near term.

This article is for informational purposes only and does not constitute investment advice.