Other Free Encyclopedias » Online Encyclopedia » Encyclopedia - Featured Articles » Featured Articles: Timex Indiglo Watches - The History of Timex Indiglo Watches to Zermatt Switzerland Hotels - Hotels in Zermatt

Yen To Usd - Forex Trading, the Yen to USD Pair

japan trade currency market

Traders who are interested in making money on the forex market need to look at all of their options in order to decide which currency pair to follow the closest. One of these options is the yen and USD pair. Being that Japan is the largest economy in Asia, and that it consistently trades with the United States, Asia, and Europe, multinational corporations are constantly transferring money from their local currency to the yen, and the other way around. In addition, Japan has had very steady low interest rates for quite some time. Since the USD is the most traded currency in the world, the Yen to USD pair is one of the most heavily traded pairs on the forex market.

One of the advantages of trading the US dollar and the Japanese yen pair is the fact that the bid-ask spread is low. This means that less money needs to be given to a forex broker in order to trade the yen and the USD that most other currency pairs. In addition, the market is very liquid, meaning that it is possible to buy or sell at almost any time. Since the yen is traded most heavily during the Asian business day, trading the Yen to USD pair is an excellent option for US traders who like to trade during the night hours.

Another reason to pay attention to this currency pair is the fact that the Japanese yen has a very low interest rate which has remained steady for quite some time. This is ideal for what is known as the carry trade strategy. The carry trade is the strategy in which a trader buys a currency with a low interest rate, and invests the money in a currency with a higher interest rate. The carry trade becomes very popular during times when the market is very calm and does not fluctuate a great deal. At times when the market is very volatile, on the other hand, the carry trade becomes much less popular.

For traders following the yen and USD pair, the carry trade is an important factor whether it is their particular strategy or not. During times when the market is calm, for example, global hedge funds will tend to sell the yen, making this the most likely trend. When the market is volatile, however, investors will want to put their money back into the yen, strengthening it.

Another factor to consider is the fact that Japan has very little natural resources. The Japanese economy relies almost entirely on it work ethic and innovation to remain powerful. It is well known that, especially in modern times, imports and exports are vital to every economy in the world. It may be less well understood that imports and exports are likely more important to the Japanese economy than most others, due to the fact that so little resources exist within the nation itself. This means that when the prices of raw materials go up, it is likely to hit the yen harder than the USD. Similarly, if the economy of countries which buy heavily from Japan is hit, this will have a stronger effect on Japan than other major economies.

The central bank of Japan is also known for being more interventionist than most. This means that if the yen begins to swing downward, it is at least possible that a change made by the Bank of Japan will cause the currency to swing back upward.

It is also important to realize that Japan has gone through a long period of less than average economic growth. it is only due to this fact that the interest rate of the yen has remained so low. If the Japanese economy recovers in full, which is certainly possible, maybe even likely, the popularity of the carry trade in Japan may end, which could cause many changes to occur in the way that trading occurs between the yen and the USD.

Yosemite Park Hotels - Yosemite Park Hotels--History, Luxury, and Eco-Friendly Beauty [next] [back] Yellowstone Vacation Packages - Vacation Packages for Yellowstone National Park

User Comments

Your email address will be altered so spam harvesting bots can't read it easily.
Hide my email completely instead?

Cancel or