Representing the US dollar against the Japanese Yen, this is a heavily traded pair. Recent attempts by the Bank of Japan to expand their purchase of yen, boosted exports but devalued the currency and raised import prices. Using this currency pairing is sometimes called “Trading the Ninja”. The Japanese economy relies heavily on exports to the US, making the USD/JPY an interesting pairing.
USD/JPY Overview
The USD/JPY is a highly popular currency pair among traders in the forex market as it reflects the exchange rate of the U.S dollar against the Japanese yen.
This pair is, in fact, the second most traded currency pair in the forex market after the EUR/USD – enjoying a daily trading volume upwards of $800 billion. Therefore, USD/JPY traders will find that positions in this pairing are extremely cost effective with high liquidity, lower spreads and rapid execution on all orders.
What factors influence the USD/JPY?
The economic strength of these two economies dictates the performance of this major forex pair and as such, important indicators are the GDP and the performance of the labour market (i.e. unemployment rates and wage growth metrics).
As is the case with all national currencies, the monetary policies and interest rate decisions of the Federal Reserve Bank in the U.S and the Bank of Japan will likely influence investor sentiment in this pair.
Also, since the Japanese economy is heavily reliant on commodities, traders can look to international import and export figures to determine the future market direction.
Did you know?
The performance of Japanese yen on the global currency markets is largely correlated with that of gold. Therefore, since the yen is the quote currency of the USD/JPY pair, when the value of gold drops, USD/JPY tends to appreciate in value and vice versa.