Goldman Sachs Sees Japanese Yen as Stronger Hedge Against AI Market Shock

Goldman Sachs says the Japanese yen is becoming a more effective hedge against an artificial intelligence-driven market shock. In an October 23 research note, strategists including Kamakshya Trivedi highlighted changes in Japan’s monetary policy environment. The yen gained 0.9% against the US dollar on October 22 and briefly reached a one-month high the following day.

The assessment follows a global technology stock selloff fueled by concerns over AI investment. Goldman Sachs argues that US equities and the dollar face growing exposure to weaker economic growth. Meanwhile, Japan’s changing policy environment has reduced the yen’s sensitivity to rising global bond yields. The currency has shown smaller declines during yield increases than in the previous six to seven years.

Goldman Sachs expects the yen to offer stronger protection if an AI-related downturn pushes stocks and bond yields lower simultaneously. However, the bank acknowledges that broader market conditions could still pressure the currency. Strategists favor selling the euro against the yen in the near term. Over longer periods, they consider selling the dollar against the yen a more effective defensive position. Investors will also monitor the Bank of Japan’s October 30 policy decision.