The euro was on course for a weekly decline on Friday as France’s sovereign risk premium climbed back toward levels not seen since the 2011 euro zone debt crisis, while the yen headed for its strongest weekly gain since early September on safe-haven demand tied to a sell-off in artificial-intelligence stocks.

The single currency slipped 0.15% to $1.1200 and was set to finish the week down 0.42%, according to Reuters. The move came as a sharp sell-off in French government bonds pushed the country’s risk premium over German debt to its widest since the euro area’s sovereign crisis more than a decade ago. French business activity unexpectedly contracted in October, data released Friday showed, adding to pressure on the currency.

Against the yen, the euro fared worse, touching 175.25 yen, its weakest since October 2025, before trading at 175.75 yen, down 0.05% on the day and roughly 1.0% lower for the week. The euro was also set to fall 0.55% versus the Swiss franc.

The yen’s rally came after investors sought protection in safer assets amid fragile equity markets, worries about France’s fiscal path and the possibility of fresh street unrest there. The Japanese currency had been roughly flat earlier in the week before jumping on Thursday.

“The yen was bought as a hedge, not as an allocation,” said Shoki Omori, chief fixed income strategist for Japan at Deutsche Bank. “But we see no evidence of Japanese institutions repatriating, and the carry against the dollar is intact.” The bank expects the dollar-yen pair to trade between 155 and 159 into the Bank of Japan’s policy meeting, he added.

The dollar rose 0.15% to 157.00 yen. It had climbed 2.15% to 156.88 in the week ended September 21, when the Federal Reserve raised rates and signaled it was prepared to act to tame inflation.

The dollar index, which tracks the greenback against a basket of currencies, gained 0.20% to 101.80 after touching 101.44 on Thursday, its lowest since the start of the month. The gauge was on track for a 0.05% weekly rise.

A recent technology-led market slump has shown the dollar no longer drawing much benefit from safe-haven flows, as doubts about the durability of the AI investment boom fueled expectations that the Federal Reserve may lean more dovish. The yield on the benchmark 10-year US Treasury note rose 2.5 basis points to 4.98% on Friday, after falling 19.5 basis points a day earlier when renewed concerns about the sustainability of the AI rally drove investors into government debt.

Strategists said both the euro and the dollar faced selling pressure this week, leaving the pair only marginally in the dollar’s favor.

“My suspicion is that euro/dollar is currently like a deer caught in the headlights, frozen in place as it waits for next week’s central bank meetings,” said Volkmar Baur, a foreign-exchange strategist at Commerzbank.

The European Central Bank is widely expected to hold rates steady on Thursday, but investors will parse any signal on the policy outlook after President Christine Lagarde said in late September that a moderate response to inflation was appropriate.

In Japan, data Friday showed core consumer inflation exceeded the Bank of Japan’s 2% target in September for the first time in nine months, a sign of broadening price pressure that strengthens the case for a near-term rate increase. Most economists surveyed by Reuters expect the central bank to stand pat at next Friday’s meeting, followed by a quarter-point hike at its December gathering. Investors are also preparing for the Federal Reserve’s policy decision next week.

Key levels at a glance:

AssetLatestDaily changeWeekly changeEUR/USD$1.1200-0.15%-0.42%EUR/JPY175.75 yen-0.05%-1.0%USD/JPY157.00 yen+0.15%–Dollar index101.80+0.20%+0.05%US 10-year yield4.98%+2.5 bp–

Note: Weekly USD/JPY comparison not provided in source material.

For currency markets, the week’s action underscores how political and fiscal risk in the euro area’s second-largest economy has become a driver of the shared currency, even as the ECB stays on hold. A widening French spread raises the cost of borrowing for Paris and tends to weigh on the euro, while the yen’s gains look more like tactical hedging than a shift in long-term positioning, given that the yield gap with the US remains intact and Japanese institutions have shown little sign of bringing capital home. Next week’s back-to-back central bank meetings in Tokyo and Washington are likely to determine whether these moves extend or reverse.