The Japanese yen rose as a selloff in US technology shares led traders to seek safer assets — a trend that strategists at CIBC and Nomura expect will continue.
The yen strengthened as much as 0.6% against the US dollar to 157.54 on Thursday, outperforming all of its Group of 10 peers after a Democratic sweep in this week’s US midterms led to concern about artificial intelligence investments that hit US stocks.
“If the AI trade continues to unwind, investors will be looking for somewhere to go,” said Sarah Ying, head of foreign-exchange strategy at CIBC. “We suspect that demand for haven currencies would rise,” including the yen or franc.
She expects the yen to strengthen to 148 against the dollar by the end of 2027, a more-than-6% rise from current levels, as investors flee dollar-denominated assets.
Dominic Bunning, head of Group of 10 strategy at Nomura, said the firm remains long on the Japanese yen against the dollar, calling it the “consistent best FX trade” in an environment in which equities and yields are both declining. The Nasdaq 100 fell 5.5% on Thursday, while short-dated US Treasury yields declined more than 10 basis points.
The yen also stands to benefit if Japanese money managers rotate more of their investments out of foreign bond markets and into local ones as the Bank of Japan raises interest rates, he said. He expects further BOJ hikes to help sustain the trade.
A Bloomberg gauge of the US dollar, however, edged higher by just 0.1%.
“The yen is benefiting from the return of safe-haven demand amid equity volatility,” said Nathan Thooft, a senior portfolio manager at Manulife Investment Management. “The dollar has the opposite problem: so much US exceptionalism is now tied to AI that any crack in that story can quickly become a dollar story, too.”
With assistance from Anya Andrianova.
This article was generated from an automated news agency feed without modifications to text.
