Before the outbreak of the global financial crisis in 2007, when most economies encountered continuous negative GDP growth, the Nikkei index and the dollar/yen trend showed a negative correlation.
Investors believe that the performance of the Nikkei index reflects the state of the country’s economy, so the rebound in the Nikkei index will strengthen the yen.
vice versa. When the Nikkei index falls, the USD/JPY will rise.
However, when the financial crisis came, the relationship between them became crazy.
The Nikkei and the USD/JPY usually move in opposite directions, but now they are moving in the same direction.
Very surprising, isn’t it?
Who would think that stocks will be related to the foreign exchange market?
We thought of it, of course, you know it now.
Relationship between USD/JPY and Dow
Now let’s look at the relationship between USD/JPY and the Dow Jones Industrial Average. Based on what you read before, you might think they are highly positively related.