Goldman Sachs analysts argue that the Japanese yen has become a more effective hedge against market shocks linked to artificial intelligence, according to a note published over the weekend and reported by Bloomberg. The bank’s analysts, including Kamakshya Trivedi, said the currency now looks more attractive for pro-cyclical portfolios than in previous years. Current global conditions still tend to push the yen weaker, they added.
The yen acted as a safe haven during a global tech stock sell-off the previous week, when fears over AI investment pressured share prices. Those fears also triggered a sharp rally in US government bonds. On Thursday 22 October the yen gained 0.9 percent against the dollar.
Why the yen’s behaviour has changed
Goldman said the yen’s weakness in response to rising global yields has been more limited than in the past six to seven years. Strategists said this likely reflects reduced depreciation pressure from Japanese domestic policy. The bank contrasted the present with 2022, when the Bank of Japan maintained yield-curve control.
The analysts said this shift means the yen should be a hedge that is not too costly to hold, although carry remains negative. A short dollar-yen position, they argued, should be the most effective hedge against broad instability in economic growth, or against sharp shocks triggered by AI.
Near-term positioning and risks
Goldman remains short the euro against the yen in the near term. It cited a lack of clear domestic yen catalysts and the difficulty for the Bank of Japan to surprise markets with hawkish messaging. The Bank of Japan’s next policy decision is due to be announced on 30 October.
Other factors limit the dollar’s upside against the yen, the bank said, including a constructive domestic policy backdrop, cheap yen valuation and high risk of currency intervention.
Source: Bank of Japan · Goldman Sachs
