Yen Surges Amid Tech Stock Selloff, Haven Demand Emerges
The Japanese yen (JPY) climbed to its highest level against the US dollar (USD) in over five weeks as investors sought refuge in the safe-haven currency during a sell-off in technology stocks.
The JPY strengthened by up to 1.5% to 153.74 per USD as of 6:16 AM EST in New York. This represents its largest one-day gain in four months. The surge comes amidst a rally in US Treasuries and a plunge in stock markets.
Concerns over the competitiveness of the US technology sector emerged following news of a new artificial intelligence model developed by Chinese startup DeepSeek. The yen, typically viewed as a safe-haven asset, also saw increased demand in the options market.
Data from the Depository Trust & Clearing Corporation indicates that trading volume doubled recent averages, while weekly hedging costs surged to their highest level in six weeks. The yen had earlier gained ground after President Donald Trump threatened tariffs and sanctions against Colombia for refusing entry to deported migrants. However, these gains were briefly reversed when the US reached a deal with Colombia, averting the threatened measures.
Analysts note that the yen has further upside potential due to the Bank of Japan's (BOJ) recent interest rate hike and its projected tightening path. Hedge funds reduced their bearish bets on the JPY ahead of the BOJ's meeting, further supporting the currency.
According to Jane Foley, head of G-10 FX strategy at Rabobank, expectations that the BOJ will continue raising rates, albeit at a gradual pace, are likely to boost the JPY by reducing its appeal in carry trades. Despite some volatility following the BOJ's announcement, Foley maintains that she expects the JPY to reach 145 per USD within the next 12 months.