Early on Monday, the Japanese yen surged to its highest levels since January 2019 following fresh escalation of the US-China trade war. At the time of writing, USD/JPY is trading at around 105.35.

The safe haven appeal of the Japanese yen rose after China imposed a fresh round of tariffs on US imports late last week. Following this development, US President Trump announced an additional 5% tariff on Chinese imports worth $550 billion. He also ordered American companies to move out of China and look for alternate manufacturing locations.

USD/JPY turned even more bearish following a sudden weakness in the US dollar and a renewed demand for the Japanese yen, a safe haven currency investors turn to when uncertainty reigns high in financial markets. The deteriorating market sentiment caused Wall Street to close lower last Friday.

Trump doesn’t look too keen to back down in his trade dispute with China, stating over the weekend that he regretted not having imposed higher tariffs on Chinese goods sooner. Markets are now concerned about how the increasingly worsening trade war will affect global economic growth and whether it will push economies into recession.