(Bloomberg) -- The yen rose to its highest level in more than five weeks versus the dollar as traders sought safety in haven currencies amid a sharp selloff in global tech stocks.
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The Japanese currency strengthened as much as 1.5% to 153.72 against the dollar, its biggest intraday advance in four months, and held gains after the open of equity markets in New York. The Swiss franc rallied 1% to the day’s high of 0.8965 versus the greenback, while the yield on US 10-year notes fell as much as 12 basis points to 4.50%.
News of a fresh artificial intelligence model from Chinese startup DeepSeek rattled markets Monday and raised questions over the exceptionalism of the US technology sector, prompting the rally in US Treasuries and slump in tech shares.
“Markets are seeing a very classic risk-off move in both FX and rates today,” said Leah Traub, a portfolio manager and head of the currency team at Lord Abbett & Co. “Given long positioning and US stocks near or at all time highs, it is not surprising to see some profit taking. If the risk-off sentiment continues, the yen can appreciate further.”
The yen, a traditional haven asset, met fresh demand through the options market, too. Volumes reached double the recent averages, according to data from the Depository Trust & Clearing Corporation, while one-week hedging costs jumped.
“A story like this shoots right at the heart of the AI story that has driven the tech complex to such remarkable heights over the last two years,” John Hardy, the chief macro strategist at Saxo, wrote in a Monday note. “If this triggers a mini-crash in equities on the need to reassess the built-in assumptions of the scale of coming AI spending, it will be felt across markets, including FX.”
The yen rose earlier after President Donald Trump ordered his administration to impose tariffs and sanctions on Colombia for refusing to allow two military planes carrying deported migrants to land. It then briefly reversed gains after the US reached a deal with Colombia, holding off on imposing threatened tariffs and sanctions.
Some strategists note that the yen has room to gain given the Bank of Japan’s latest interest-rate hike and future policy path which should help narrow the yield gap between Japan and other major countries. Hedge funds cut their bearish bets on the yen ahead of the central bank raising rates last week, which supported the currency as well.