Many people are attracted to Forex trading because of its characteristics. But behind those wonderful features, the forex market is enormous, sophisticated, and aggressively competitive. Prominent companies, marketing institutions, and known traders rule the market and they immediately integrate new information to formulate strategies and dominate their respective markets. Forex trading is not for the ignorant and unprepared. To benefit in the Foreign Exchange Market, traders must have a wide array of knowledge about various currencies. This includes the currency itself, the economic statistics of a specific country and even the different factors that can influence the specific currency.
Only seven currencies account for about 80% of the foreign exchange market. One of these currencies is the Japanese yen. It is known as one of the world’s largest currencies when it comes to international trade and forex trading. This title is very appropriate for the Japanese yen since its country has one of the largest economies in the globe, has the highest gross domestic product among nations, and is one of the largest exporters when it comes to dollar.
As a trader, you should know that the Japanese yen is considered a safe haven currency. Which means it is a currency that is preferred by investors in times of market crisis like economic uncertainty and inflation. A safe haven is an investment that is anticipated to withhold or increase in value during times of crisis. Safe haven currencies originate from countries that have very high economic stability, and Japan has a very stable economy. Whenever there are bad situations in the U.S. dollar, most traders turn to the Japanese Yen because of its stability as a currency.
Major currencies you see in the Foreign Exchange Market are being backed by each country’s respective central banks, in the case of the Japanese Yen, it is backed by the Bank of Japan (BOJ). The Bank of Japan executes in a way that it encourages growth and minimizes inflation. But deflation has been a constant danger for many years in Japan, and the BOJ has continued to pursue an order of very low rates, hoping of encouraging demand and economic growth.
When trading in the Forex Market, one of the most popular pairs that you see is the USD/JPY pair. It is popular among traders because of its relative liquidity and low spreads. When you view charts about the U.S. dollar to the Japanese Yen it is necessary to realize that the yen is greatly dependent on exports and on the global financial market. Because of this, it may be very difficult to trade JPY-based pairs successfully when the market is volatile. Although, the Japanese yen remains to be a popular Forex pair for carry trades, which has boosted the acknowledgment of the USD/JPY pair.
The Japanese Yen is popular for carry trades. This kind of trade is a well-known strategy for traders and investors alike. Carry trades happen when investors would borrow currencies which have low-interest rates, such as the Japanese Yen, to purchase another foreign currency and invest in its higher growth. During a crisis, whenever the market has a very high volatility, traders would lessen the risk by selling some of their foreign investments and cover their short positions in yen.
The Yen is a good asset to add in your portfolio, trade the Japanese Yen with us here in Millennium-FX.