Freedom warns of risks for tech stocks due to the yen’s strengthening

A sharp strengthening of the Japanese yen is creating a risk of increased volatility in the U.S. market, primarily in expensive technology assets, according to Freedom Broker analysts. If carry-trade participants accelerate the closing of yen short positions, pressure on this segment may increase. The review does not specify target levels or the potential price changes for individual stocks.

Why the yen’s movement matters for the market

In focus is the U.S. dollar–Japanese yen currency pair (USD/JPY), which shows how many yen are given for one dollar. A decline means the Japanese currency is strengthening.

USD/JPY fell to a seven-month low of 152.9. Since last week, the yen has strengthened by about 4.5% amid expectations of further tightening of monetary conditions by the Bank of Japan and interventions carried out by the regulator.

If the closing of yen shorts by carry traders accelerates, it will increase volatility—especially in expensive technology assets—Freedom Broker analysts warn. For now, the U.S. market’s reaction to this situation remains muted.

Carry trade is a strategy in which an investor borrows money in a currency with a low interest rate and invests it in assets or a currency with a higher yield, profiting from the interest-rate differential 

Unwinding carry trades may increase volatility

The risk is tied to carry-trade operations and accumulated short positions in the Japanese currency. If the yen continues to strengthen, participants in such trades may accelerate the closing of shorts.

According to Freedom Broker, the consequences are most likely to affect expensive technology assets. At the same time, the analysts have not yet recorded a pronounced market reaction and do not name specific companies that could come under the greatest pressure.

Demand for AI-linked assets remains in place for now

In the previous session, the technology sector gained 0.70%, but the positive performance was concentrated mainly among semiconductor and computer-memory manufacturers. The iShares Semiconductor ETF (SOXX), which tracks chipmakers’ stocks, rose 3.52%. The Roundhill Memory ETF (DRAM), focused on memory-chip producers, gained 6.6%. Freedom Broker analysts view this as a sign of persistently strong demand for securities tied to AI infrastructure and memory, against weaker results across most other market segments.

The Nasdaq 100 ended the previous session up 0.21%, while the S&P 500 fell 0.38% and the Dow Jones declined 0.51%. Ahead of the open, Nasdaq 100 futures were up 0.10%, while S&P 500 futures were down 0.24%.

The risk balance remains moderately negative

Freedom Broker assesses the risk balance for the upcoming session as moderately negative with average volatility. In addition to the yen’s strengthening, investors are watching oil price dynamics and reassessing the outlook for Federal Reserve policy.

The key macroeconomic events of the week will be the releases of the August producer price and consumer price indexes on September 10 and 11. These data will be published ahead of the Fed meeting scheduled for September 15–16. Following strong U.S. labor-market data, investors are more actively factoring in the possibility that the Fed will maintain its current course or raise the interest rate. In August, nonfarm payrolls increased by 162k versus a forecast of 53k, unemployment remained at 4.1%, and average hourly earnings rose 0.3% month over month and 3.1% year over year.

Against this backdrop, the yen’s strengthening is becoming an additional source of uncertainty for the technology segment. At the same time, strong demand for chip and memory makers’ stocks has so far persisted, and the market reaction to the currency factor remains limited.

Not an individual investment recommendation.