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Dollar to Yen (also reffered to as USD to JPY or USD/JPY) is the exchange rate of U.S. dollar expressed in Yen and belongs to major currency pairs. Dollar to Yen is the second most traded currency pair in the world. Dollar to Yen is also honored among forex traders thanks to its calm nature and steady trends. However, imporant economic news can drive the market significantly and broke established trends.
The USD / JPY currency pair consists of the world's largest economies, United States versus Japan. According to interbank market's statistics, USD is involved in more than 85% forex trades while JPY in 19% of forex transactions. Dollar to Yen makes up to 14% turnover of the whole forex market.
Spread of Dollar to Yen is usually one of the lowest among currency pairs and is therefore suitable practically for any type of trading. The most volatile periods of Dollar to Yen are especially when London and New York sessions overlap. But increased volatility is also usual during Tokyo session when economic news are realesed.
The pair USD/JPY has also been influenced for many years by the phenomenon of the carry trade. Indeed, for many years, interest rates were kept at 0% by the Bank of Japan. Americans rates controlled by the Federal Reserve have them for many years been much higher than Japanese rates. As a result, investors sold the yen heavily to buy the American dollar which was more profitable.
However, with the crisis, the interest rate differential has narrowed considerably and the phenomenon of the carry trade is no more up to date on this pair. As a result, the yen has appreciated considerably due to the unwinding of carry trades. For a country based on exports such as Japan, this severely penalizes the country's growth.
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
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