Japanese yen hits one-month high as tech stock sell-off drives safe-haven rush

The Japanese yen climbed to its strongest level in more than a month on Friday, as an abrupt tumble in global technology shares prompted investors to seek shelter in traditional safe havens.

Trading as firm as 156.08 per dollar in Tokyo, the yen broke out of its recent holding pattern to register levels unseen since 18 September, the day the Bank of Japan lifted benchmark interest rates. The currency advanced up to 0.4% during Asian trade, following a 0.9% gain on Thursday, putting it on track for a 1% advance across the week.

What triggered the flight to safety

The move was sparked by a sharp equity sell-off driven by rising doubts over the commercial returns on massive corporate spending in artificial intelligence. As tech valuations came under pressure, money moved rapidly into sovereign paper and defensive currencies.

The yield on benchmark 10-year US Treasuries slid to 4.953%, lingering near a one-month low. That drop pulled the dollar index down to 101.52, near its lowest mark of the month, narrowing the yield advantage that had previously weighed on the Japanese currency.

Analysts at ING noted that while a risk-off backdrop removes immediate pressure on the US Federal Reserve to tighten policy further, persistent fiscal deficits and underlying inflation mean long-term yields could test higher levels again.

Geopolitical friction added another layer of risk aversion. Brent crude rose past $114 a barrel after Houthi attacks in Saudi Arabia raised fears of supply disruptions from the Gulf. Analysts at OCBC pointed out that different risks are channelling capital into different corners of the market: AI jitters have funnelled funds into the yen, while climbing energy prices have helped commodity-linked currencies.

How major currencies traded against the dollar

Domestic price pressures in Tokyo

The yen's rebound also coincided with domestic data showing Japan's core consumer price index crossed the Bank of Japan's 2% target in September for the first time in nine months. The broadening price pressure has reinforced market expectations of another interest rate increase.

A Reuters poll of economists indicates the Bank of Japan will probably hold its policy rate steady next week before considering a quarter-point increase in December. In contrast, the European Central Bank is expected to maintain its benchmark rate at 2.5% next week, with the euro muted by French fiscal concerns.