The dollar/yen has been very interesting since the start of the financial crisis. When the equity markets fell, the USA embarked on a huge amount of quantitative easing which served to weaken the Dollar.
When we say USD JPY this currency pair formula can be translated into sentence form like this – no. of Japanese yen a trader will require spend to be able to buy one U.S. dollar. From the other angle, if one dollar is sold against Japanese yen how many Japanese Yen the dollar seller will receive.
Trading the USD JPY currency pair in the trader’s circle is also known as trading the gopher. USD which appears in the beginning of the currency set is called the base currency and JPY which appears later in the pair is called the counter or quote currency.
Some economists and experts have made some critical observations from the Bank for International Settlements survey. They have released a report as per which the USD JPY currency pair with 17% of total daily volume is the second highest traded currency pairs amongst the major pairs.
The value of the USD JPY pair is quoted in the following manner – 1 U.S. dollar equals ’n’ number of Japanese yen. Suppose this pair happens to be priced at 76.80 it is translated for a layman as – that an investor or trader will have to shell out 76.80 yen if She/he wants to purchase 1 U.S. dollar.
The USD JPY exchange rate fluctuates or is triggered by causes that either put worth of the United States dollar under some kind of economic pressure or the Japanese yen, independently or in association with each other, as well as to other currencies. If any / either or both economies face any crises or upsurge due to any reason, then the currency will get to experience a blow and the exchange rate as a result are bound to show some swaying or movement.
It is because of this reason that the interest rate disparity between the Federal Reserve (Fed) and the Bank of Japan (BoJ) shows an impact on the value of these currencies when compared with each other.
An example – when the Federal Reserve takes some kind of step, new initiative or intervenes in the open market operations with an objective of strengthening the power of U.S. dollar, the worth of the USD JPY cross is likely to increase, as a result of strengthening of the U.S. dollar especially when the same is compared to yen.