The Japanese yen strengthened to its highest level in more than a month on Friday as concerns about the durability of the artificial intelligence investment boom triggered a broader shift toward perceived safe-haven assets. The move came alongside falling US Treasury yields and a weaker dollar, while oil prices above $110 per barrel highlighted the tension between persistent inflation risks and growing concerns about global economic growth.

AI Investment Concerns Reshape Currency Markets

The yen gained 0.3% to 156.28 per dollar on October 23, leading advances among major currencies and putting it on course for a weekly rise of around 1%, its strongest weekly performance since early September. The dollar index, which measures the US currency against a basket of major peers, stood at 101.52 after touching 101.44 on Thursday, its lowest level since the beginning of the month.

The currency shift reflects a reassessment of risk across global markets. Investors have become more cautious about whether the substantial capital spending required for AI infrastructure, including data centers and advanced chips, will generate returns sufficient to justify the costs. When equity markets weaken, investors often reduce exposure to assets perceived as riskier and seek greater protection in government bonds and selected currencies.

The dollar has not benefited as consistently from this shift as it might in previous periods of market stress. Falling US yields and reduced expectations for further Federal Reserve tightening have weakened one of the currency’s key sources of support.

Falling Treasury Yields Contrast With Rising Oil Prices

The yield on the US 10-year Treasury note hovered near 4.953%, close to a one-month low, after declining sharply during Thursday’s equity sell-off. Lower yields can support demand for government bonds during periods of uncertainty, while also reducing the relative return advantage of dollar-denominated assets.

At the same time, Brent crude futures climbed above $114 per barrel, extending a rally fueled by concerns about potential supply disruptions following Houthi attacks in Saudi Arabia. Higher energy prices can reinforce inflationary pressure and complicate central banks’ policy decisions. The market response suggests that, for now, concerns about growth and financial-market valuations are outweighing some of those inflation risks.

The shift has not benefited every currency equally. The Canadian dollar and Norwegian krone have received support from higher oil prices, while the Swiss franc has drawn demand amid concerns over France’s fiscal position. The euro, meanwhile, has faced pressure from uncertainty surrounding heavily indebted European economies.

Bank of Japan Policy Becomes a Key Test

Japan’s domestic inflation outlook is adding another factor to the yen’s recovery. September core consumer inflation rose above the Bank of Japan’s 2% target for the first time in nine months, strengthening the case for a possible interest rate increase in the coming months. Markets are watching the central bank’s next meeting for signals on the timing and pace of further policy tightening.

The yen’s near-term direction will depend on whether safe-haven demand persists, US Treasury yields continue to fall and the Bank of Japan signals a more restrictive policy path. A renewed recovery in technology shares or a rebound in US yields could reverse part of the currency’s gains. Investors will also monitor oil prices and geopolitical developments, which could revive inflation concerns and alter expectations for central banks worldwide.