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The most recent fall in EM assets has been driven to a significant extent by the US-China trade war, and some lost confidence in the Chinese economy and instead of acting as a safe-haven, the JPY became more closely aligned to Asian currencies and assets, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.

Key Quotes                  

“The recent fall in JPY is consistent with weaker Asian currencies, albeit playing catch-up in the last week to falls in Asian currencies over the last month.”

“Similarly, Japanese equities have looked a lot more like Asian regional equities rather than developed market equities in the last two months.”

“In the past, the Japanese stock market was frequently negatively correlated with JPY, where a weaker JPY was seen to boost Japanese export revenue and inflation expectations.”

“However, the reverse is true in the last month or so, JPY has been positively correlated with Japanese equities; in that, they have both fallen in unison.   This is the normal reaction in Asian regional markets and again suggests that JPY is responding to regional investor sentiment.”