On May 19, JP Morgan Japan macro research analysts said in a research report that the correlation between USD/JPY and the Nikkei 225 index may strengthen.
Analysts pointed out that since April, foreign investors’ investment in Japanese stocks has increased significantly, causing the Japanese stock index to outperform global stock indexes.
The yen has been the weakest of major currencies since April, suggesting overseas investors may be hedging foreign exchange risk while investing in Japanese stocks.
Given the weak fundamentals the yen has historically faced, the “the more the Nikkei rises, the weaker the yen” dynamic could strengthen if foreign investors hedge their exposure to foreign exchange when increasing exposure to Japanese stocks, the analysis said. The teacher added.