The yen drifted directionlessly around the upper 163 range against the dollar in Tokyo trading on Tuesday. The currency inherited the yen-weakening, dollar-strengthening trend from the New York session overnight, but active trading was restrained ahead of monetary policy decisions from the U.S. Federal Reserve and the Bank of Japan.
As of 5:00 p.m. Tokyo time, the yen stood at 163.68-70 per dollar, up 0.10 yen from the previous day. The euro traded at 186.55-59 yen, up 0.42 yen. “Persistent wariness over potential yen-buying, dollar-selling currency intervention by the Japanese government and the Bank of Japan continues to cap the upside,” a foreign exchange broker noted. Additionally, the sharp decline in the Nikkei Stock Average prompted investors to adopt a risk-averse stance, with buying of the yen—perceived as a relative safe haven—providing underlying support.
In New York trading on Monday, position-adjustment selling of the yen and buying of the dollar dominated ahead of the Fed and BOJ decisions, with the dollar reaching 163.81-91 yen as of 5:00 p.m., up 0.11 yen from the previous day. Meanwhile, Monday morning trading in Tokyo was confined to a narrow range centered around the 163.70 level. Market participants suggested that “with the FOMC decision due by tomorrow and the BOJ meeting later in the week, a wait-and-see mood is intensifying further.”
In stark contrast to the currency market’s stagnation, a ferocious wave of selling swept through Asian equity markets, centered on semiconductor-related stocks.
In the South Korean market, SK Hynix shares plummeted more than 15% despite reporting record quarterly revenue and profit, as the results fell short of market expectations. Samsung Electronics also tumbled over 8%, and the benchmark KOSPI index triggered circuit breakers that temporarily halted trading.
Japanese markets faced similarly brutal conditions. Flash memory giant Kioxia sank 14%, semiconductor equipment maker Tokyo Electron dropped 12.6%, and SoftBank Group (9984.T), which holds a stake in British chip designer Arm, fell nearly 10%.
In Taiwan, TSMC (2330.TW), the world’s largest contract chipmaker, slid 3.5%, while a Hong Kong-listed index of Chinese semiconductor stocks recorded a decline of more than 6%.
The Asia-led sell-off was triggered by a sharp plunge in U.S. semiconductor stocks the previous day. While Nvidia pared losses to end flat in U.S. trading on Monday, Intel fell roughly 6%, Advanced Micro Devices dropped 8%, and memory majors Micron Technology and Seagate Technology both sank more than 8%. Western Digital lost nearly 7%, while Sandisk cratered more than 14%. The Philadelphia Semiconductor Index (SOX) shed over 4%.
According to market participants, multiple factors converged to drive the sharp correction.
First, skepticism over the sustainability of AI investment is spreading. Reports that Nvidia could provide up to $250 billion (approximately ¥40.9 trillion) in debt guarantees related to OpenAI’s data center plans have reignited fundamental questions about whether the enormous sums pouring into AI will actually translate into profits.
Second, there is growing wariness over intensifying competition from China. Reports that state-owned Shanghai Aishengna Electronic Technology Group has succeeded in domestic mass production of deep ultraviolet (DUV) lithography equipment—a domain previously monopolized by the Netherlands’ ASML—chilled investor sentiment. The equipment is reportedly expected to be delivered to SMIC, Hua Hong Semiconductor, and ChangXin Memory Technologies (CXMT) within the year.
Third, structural factors specific to the South Korean market were cited. Kieron Poon, head of Asia-Pacific investments at Aberdeen Investments, analyzed that the decline “reflects an ongoing deleveraging process in the Korean market and cooling global investment sentiment toward technology stocks.” He added, “This correction has not altered our long-term bullish view on semiconductors. On the contrary, it has brought valuations of quality companies back to attractive levels, providing a good opportunity to accumulate at more reasonable prices.”
David Riedel, founder of Riedel Research Group, expressed a similar view, noting that “the correction in AI-related stocks simply reflects investors shedding some of the valuation froth that had built up.” While acknowledging concerns such as rising funding demands for AI investment and intensifying competition with China, he said that “long-term demand in the memory industry remains robust, and corporate fundamentals have not been impaired.”
However, more cautious voices have also emerged from parts of the market. Violetta Todorova, senior research analyst at Leverage Shares, warned that “when trading in a particular sector becomes this crowded, investors aren’t waiting for negative news—they just need a ‘pretext’ to take profits.” Lynn Wee Cheng, managing director at Swiss Union Bancaire Privée, analyzed that “market sentiment toward AI-related semiconductors has rapidly shifted from greed to fear. Investors are interpreting every piece of news negatively, using it as an excuse to sell without calmly assessing the true impact on fundamentals.”
Amid the broad sell-off, Chinese internet majors listed in Hong Kong bucked the trend. Tencent rose 4%, Meituan gained 2.49%, while Alibaba Group, Baidu, and Kuaishou also advanced. ChangXin Memory Technologies (CXMT), the Chinese memory giant that recently listed in Shanghai, also remained firm, rising 3.83%, suggesting that some funds are rotating into mainland Chinese tech stocks.
Looking ahead, market focus will shift to the outcomes of the U.S. and Japanese monetary policy meetings, as well as a closer examination of the impact that the semiconductor stock plunge may have on the real economy and corporate earnings. In the currency market, yen-strengthening and yen-weakening pressures are likely to intersect, keeping trading nervous and volatile for some time.