Goldman Sachs has put forward a view that runs against the prevailing narrative: when it comes to absorbing AI-driven market shocks, the yen is regaining its safe-haven role.
Why the yen is regaining haven appeal
The report's premise is that the AI investment boom has made US equities and the dollar more sensitive to growth-slowdown risk. When stock prices and bond yields fall together, the yen tends to strengthen. Last week offered a small test: during the global tech selloff the yen gained 0.9% against the dollar in a single session and reached a one-month high on October 23.
How the AI trade changed the hedging logic
In past cycles the yen weakened sharply when yields rose, while the Bank of Japan was still holding its yield-curve control policy. That policy environment has changed, and combined with the yen's undervaluation and the possibility of FX intervention, downside risk looks more limited. Goldman argues investors now have stronger reasons to hold the currency despite the cost of the rate differential.
The hedging playbook
Near term, the bank prefers cutting euro longs over shorting the yen against the euro. Over the medium term it sees betting on yen strength against the dollar as the most effective hedge against broad growth concerns or AI-induced shocks. It also notes the BOJ is unlikely to sound more hawkish than expected at its October 30 meeting.
The link between AI trades and FX
The value of the call is that it links the "AI trade" to currency hedging: if the AI capex narrative cracks, the shock will not stay inside equities — it will look for an exit through FX.