Learning Currency Trading : USD/JPY

Introduction:

USD/JPY stands for U.S. Dollar/Japanese Yen. The symbol denotes how many Japanese Yen are needed to acquire one US dollar. In the currency pair symbol, the USD is the base currency and the JPY is the counter currency.

This pair is made up of an American and an essential Asian currency. The unique aspect of this particular currency pair is that it offers a wider forex market operation time range owing to the large differences between the time zones of US and Asia. The Japanese Yen is largely traded in the forex market during the Asian working hours in the daytime, hence, giving more time to trade for traders elsewhere in the world.

This pair is favoured not only by the novices in the forex market, but also by the veterans. The reason lies in the value of Yen being a safe resort for traders during times when the volatility in the market is exceptionally low.

General facts and importance:

According to a survey conducted in 2013, the USD/JPY currency pair shares 20 per cent of the world’s trading volume. The statistics are further bolstered by the fact that the Japanese economy is one of Asia’s fastest flourishing economies. The US, on the other side, is the key economic player in the global market, hence making the currency pair important and popular.

The Japanese Yen enjoys the status of being the most liquid Asian currency. At times, the Japanese Yen has also served as the proxy for the economic progress of the Asian continent as a whole. As the fourth most traded currency, the Japanese Yen occupies a central position in the forex market. Many pundits have already anticipated the Japanese Yen to become one of the reserve currencies in the near future besides the USD. Japan has emerged as the world’s largest exporter and has rebuilt itself following the devastating Second World War to become the second largest national economy in the globe. Despite the economic setbacks, the economic standing of Japan in Asia and its ties with major players in the forex market like the US, EU etc. cannot be underestimated.

Factors affecting the pair: The pair is not only highly volatile, but also presents high liquidity making it a favourable choice for traders. However, the currency pair is very easily affected by factors such as volatility of the market and the economic conditions of Japan. The Yen is favoured particularly during periods of low volatility to help traders make money via carry trade. As soon as the volatility of the market increases, Yen loses its value.

The Bank of Japan is also notorious for meddling in forex matters that further devalue the Yen and punctuate the economic growth of the currency. This in turn, weakens the position of Yen against the USD in the pair.

Taking advantage of news trading to make money while trading: To maximise the profits you reap while trading, keeping yourself up to date with the latest currency trading news is going to be mandatory. Knowing about the expected changes in the market and the latest trends will help you in formulating your strategy accordingly.