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Peculiarities of Trading the Japanese Yen

The Japanese yen takes the third place in the list of world reserve currencies after dollar and the euro and represents one of the most popular currencies for Forex trading. As well as each currency on Forex, Japanese yen have particular features which understanding will help to increase the efficiency of trading currency pairs with yen.

japanese yen

Short excursus to the history of Japanese yen

The Japanese yen was introduced into circulation in an era of Seiji and was initially equated to 1,5 grams of gold. The gold standard was several times canceled and again introduced, depending on the features of an economic situation in Japan.

In May 1953, the Japanese yen received the status of world currency, the IMF determined its parity of 2,5 mg of gold. During the period from 1949 to 1971 the rate of the yen was strictly attached to the American dollar: 1 US dollar equaled to 360 Japanese yens. As a result of several evaluations which were connected to the dollar and other world currencies, yen cost significantly grew.

As a reserve currency the Japanese yen traditionally took the second place after dollar, however, recently its value in this scope decreased a little. The share of Japanese yen in gold and foreign exchange reserves of the countries constitutes about 4%.

Japanese yen on Forex

In view of the fact that the yen is freely convertible currency, its rate on Forex is determined by levels of demand and supply. On Forex the yen successfully competes with the British pound and Swiss franc, 12% of all turnover in the exchange is the market share of the Japanese currency.

It is possible to allocate some reasons of such popularity of yen for Forex:

  • The low-interest rate of the Bank of Japan constituting 0,1% that gives the chance to use yen as quoted currency on Carry Trade strategy.
  • The main movements on yen take place during Asian trading session that eliminates the influence of news, background from Europe on dynamics of Japanese yen.
  • The relative low cost of Japanese yen. Purchase of 1 standard lot of a currency pair of USD/JPY using leverage 1:100 in the case of current quotes constitutes about 1000 dollars.
  • The volatility of Japanese yen during Asian session is rather high for profit earning.
  • Japan is the world export of commodities. In this regard, the government of Japan pursues a purposeful policy on reduction in the cost of the yen.

Peculiarities of Japanese yen trading

Unlike standard quotes 0,0001 (a four-sign) and 0,00001 (a five-sign), Japanese yen quotes have two signs less. For example, the quote of EUR/JPY looks at 138,97 for the broker, with four-digit quotes, and 138,970 for the broker with five-digit quotes.

The Japanese yen in currency pairs is considered quoted currency. That mean, events, positive for yen, and economic releases lead to a decrease in currency pairs with Japanese currency, and vice versa.

The most widespread currency pairs with yen on Forex: USD/JPY, EUR/JPY, GBP/JPY and AUD/JPY. All these pairs are highly-volatile. During the trading session, price change of a currency pair of GBP/JPY can reach 200 points.

The best time to trade pairs with yen is considered European session. First, in the countries of Europe it is the working day, secondly, at this time traders are insured against sharp price changes as the Bank of Japan never carries out currency interventions to such time.

Trading yen pairs it is worth paying attention to the statistics reflecting export and import volumes, energy cost, inflation indicators, and also events of economic and political nature in Japan.



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Number of comments: 3
  • Nikopass
    • #

    I love Japanese Yen! It is a very interesting trading tool, that can bring delight and chills just in one minute.

  • Noahbean
    • #

    Current situation on Asian market makes me think twice while choosing yen for trading.

  • Crisnew
    • #

    It is a rather peculiar currency pair, but I like to use it in my trading strategy, it can bring really amazing profit, incomparable with other pairs.