Yen Holds Gains Against Dollar After BOJ Keeps Rates Steady

The move offered signs of a return to the yen’s traditional haven role after years in which wide interest-rate differentials and Japan’s large overseas investment flows outweighed demand for the currency during bouts of market stress. Goldman Sachs Group Inc. strategists have said the yen is becoming a more effective hedge against an artificial intelligence-driven market shock as changes in Japan’s policy backdrop reduce the risk of the currency weakening sharply when global yields rise.

The yen briefly reached its strongest level in more than a month against the dollar last week, advancing to 156.08, as a global selloff in technology stocks boosted demand for haven assets. It has since pared those gains to trade at around 158 per dollar. Meanwhile, longer-term Japanese government bonds have outperformed recently as signs of recovering domestic demand and a more supportive policy backdrop add to the appeal of elevated yields.

The 30-year JGB yield has fallen almost 40 basis points from a peak of 4.25% earlier this month. Nikkei futures extended losses in Osaka after the BOJ decision. Japanese equities have come under pressure alongside global peers as concerns over artificial intelligence-related spending and valuations fueled a selloff in technology shares. The move came amid a shift into haven assets across global markets on Friday as tech stocks dropped and oil rose.

Corporate funding costs in Japan have also risen amid a deterioration in global credit markets, with spreads widening across the board. Traders will focus on BOJ Governor Kazuo Ueda’s post-decision press conference, which traditionally starts at 3:30 p.m. in Tokyo. --With assistance from Momoka Yokoyama. More stories like this are available on bloomberg.com