Goldman Sachs: yen a better AI-shock hedge after 0.9% surge

The call comes after the yen showed renewed signs of its traditional haven characteristics during last week's global technology stock rout, driven by concerns over the AI investment boom. Goldman argues that the AI boom has left both U.S. equities and the dollar particularly exposed to a deterioration in the growth outlook, and that a shock pushing stocks and bond yields lower together would create the environment historically most favorable for the yen.

Goldman also points to early signs that the currency is becoming less vulnerable when global yields move higher, a contrast with 2022 when the Bank of Japan maintained yield-curve control as global borrowing costs surged. The changing relationship means the yen should be a less painful hedge to hold even if carry remains negative, according to the strategists. Over a longer horizon, they see short USD/JPY as the most effective protection against a broad AI shock.