The Japanese Yen (JPY) is outperforming with a 0.2% gain, strengthening on the back of renewed haven-driven gains in an environment to trade-related risk aversion as markets eye the state of the US-China relationship, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

JPY reprises traditional safe haven role

"The JPY’s relationship to risk has varied in recent months, as markets have responded to developments that have directly weakened the JPY’s traditional safe haven role. These latest gains are a welcome return to historically established relationships to sentiment."

"Domestic developments may once again return to dominate movement in the yen as markets assess the possibility of shifting coalitions in Japan’s parliament. For USD/JPY, the latest rally appears to have faltered on the back of Friday’s bearish outside reversal. We look to near-term weakness toward the psychologically important 150 level, targeting the 200 day MA around 148.00."