Goldman Sachs has recommended the Japanese yen as a strong hedge against potential U.S. recession risks, emphasizing its historical reliability in risk-off market environments. On Wednesday, the Bitcoin-Japanese yen (BTC/JPY) trading pair encountered resistance at a key trendline, coinciding with Goldman Sachs’ endorsement of the yen as the top safeguard against rising concerns over U.S. tariffs and economic downturns. As a result, BTC/JPY, trading on Japan’s bitFlyer exchange, declined by 1% after failing to break past its resistance level, according to data from TradingView. Similarly, Bitcoin’s value in U.S. dollars experienced comparable losses. Meanwhile, Asian stock markets and U.S. equity futures remained cautious as investors awaited President Donald Trump’s imposition of sweeping new “Liberation Day” reciprocal tariffs, which could escalate global trade tensions.
The uncertainty surrounding these tariffs has prompted major financial institutions, including JPMorgan and Goldman Sachs, to increase their projected likelihood of a U.S. recession or consecutive declines in economic growth. Some analysts within the cryptocurrency space speculate that Bitcoin may emerge as a haven asset if economic conditions deteriorate due to tariffs. However, Goldman Sachs maintains that the yen remains the superior hedge in such scenarios. Kamakshya Trivedi, the bank’s head of global foreign exchange, interest rates, and emerging market strategy, stated on Tuesday that the yen offers the best currency protection should the risk of a U.S. recession grow. According to Bloomberg, Trivedi further emphasized that the yen serves as a “very good hedge” against weakening U.S. labor market conditions and performs best when U.S. real interest rates and equity markets decline simultaneously.
While Bitcoin has often been regarded as a form of “digital gold” by cryptocurrency enthusiasts, historical price patterns suggest that it tends to move in tandem with technology stocks. This correlation implies that any risk-off sentiment triggered by tariffs on Wall Street could also extend into the cryptocurrency market. Additionally, the strengthening of the yen could lead to the unwinding of risk-heavy trades that were financed through cheap yen-denominated loans. This phenomenon, known as the yen carry trade, often results in broader risk aversion across financial markets. A similar event occurred in early August last year when the yen carry trade collapsed, causing significant declines in both stock prices and Bitcoin. During that period, Bitcoin’s price tumbled from around $65,000 to $50,000 within just one week.
Goldman Sachs anticipates that the yen will appreciate further, expecting the USD/JPY exchange rate to drop into the low 140s later this year. At the time of writing, the currency pair was trading at 149.77, with the exchange rate closely tracking the yield differential between 10-year U.S. and Japanese government bonds. Recently, Japanese bond yields have fallen to their lowest levels since August 2022, providing additional bullish signals for the yen.
Leave a Reply