This FX trade is the best hedge for the AI drawdown: Goldman

Investing.com · Vahid Karaahmetovic · 2026-11-05 11:47 UTC

This FX trade is the best hedge for the AI drawdown: Goldman

Investing.com -- Goldman Sachs said a short position in the dollar against the Japanese yen is the best foreign exchange hedge against a drawdown in the AI trade, particularly as the market has already priced in a strong link between falling equities and falling yields.

"Short USDJPY is, in our view, the best hedge in FX for a drawdown in the AI trade," Goldman said, adding that the case is stronger because implied correlation for equities down and yields down "has already repriced aggressively."

The bank said the yen is the standout long when equities and interest rates fall together. To test this, it examined the 20 largest "twin drawdowns," periods when both stocks and bond yields fell, since 2000, and compared how groups of currency pairs performed in each episode.

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