(Bloomberg) -- Emerging markets were left reeling as the U.S. ratcheted up the rhetoric in its trade war with China, driving all but two of the major currencies lower and sending stocks to their biggest loss since March.

The rand weakened the most, depreciating as much as 2 percent to trade at its lowest level since November 2017, sovereign yield spreads blew out an average of six basis points versus Treasuries and the Shanghai Composite, re-opening after Monday’s holiday, plunged almost 5 percent.

Investors are turning against emerging markets as the rising prospect of a prolonged trade war compounds a backdrop characterized by a more hawkish Federal Reserve and European Central Bank, a strengthening dollar and political risks rising across Europe. Currency crises in Turkey and Argentina in recent weeks have also soured sentiment.

“If it’s not Turkey, it’s Italy and if it’s not Italy then it’s the trade wars,” Gordon Kerr, a fixed-income trader at Firstrand Bank Ltd. in Johannesburg, said in a client note. “There seems to be reason after reason for emerging markets to sell off.”

The rand’s plunge was exacerbated as Japanese retail investors unwound long positions, turning to the safety of the yen, according to Mizuho Bank Ltd. Net long positions held by Japanese individuals in the rand against the yen were at the highest since 2016 in the week ended June 12, according to data from the Tokyo Financial Exchange Inc.

“Declines in the rand accelerated, probably led by selling from the Japanese investors,” said Yasuhiro Nakamura, an emerging-market currency trader in Tokyo at Mizuho. “It doesn’t seem like any domestic factor is behind the sell-off, but more to do with an overall risk-off sentiment.”

The rand weakened 1.5 percent to 13.8517 per dollar at 9:30 a.m. in Johannesburg, and slumped 2 percent against the yen. Russia’s ruble fell 1 percent against the U.S. currency and the Turkish lira and Mexican peso also posted declines.

To contact the reporters on this story: Justin Carrigan in London at jcarrigan@bloomberg.net;Yumi Teso in Bangkok at yteso1@bloomberg.net

To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net, Robert Brand

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