US stocks sold off overnight, ushering in a clear risk off tone.The Nasdaq slipped 2% on worries over AI displacement, while US tech megacaps have also fallen to their lowest since Nov 2025. Even gold failed to show its safe haven quality, slipping by 3% as risk unwinds hit precious metals which had seen unusually high speculation of late.
JPY is set to be the best performing currency this week, having rallied almost 3% with USD/JPY breaking below 153. To curb JPY shorts and calm JGB markets, Finance Minister Katayama, Chief Cabinet Secretary Kihara, and Vice Minister Mimura have all underscored that they are watching markets post-elections, while the government has also said that it will not overly rely on debt-financed fiscal spending. Softer risk sentiment now could further accelerate an unwinding of speculative JPY shorts, which remain large in our view even as fears of excessive fiscal spend are receding somewhat.
USD/KRW has slipped alongside USD/JPY to around 1440, underscoring a weaker connection to KRW’s historical tendency to depreciate with falling tech stocks. This should not be too surprising in context of the heavy resident outflows into US equities over prior months, which are perhaps due for a return if US market wobbles persist. Meanwhile, KRW can also be bolstered by foreign bond inflows ahead of the inclusion of KTBs into the FTSE World Government Bond Index (WGBI) in April, with the government projecting that index inclusion could draw as much as USD60bn.
The USD has shown resilience amid equity market slippage,firming against most currencies except for CHF and JPY, and being largely flat against EUR and the offshore RMB. Still, a market sell-off could encourage Fed Chair nominee Warsh’s view of AI being a “significant disinflationary force”, supporting the argument for rate cuts that will ultimately weaken the USD.
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Abu Bakr
February 13 in history
USD devalued by 9-10% against the JPY on 13 Feb 1973.
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