Volatility means opportunity! Watch price changes reflect directly onto your portfolio
Investors looking to trade the currencies of Australia and Japan have come to the right place. Here you can find all the relevant information needed to get started. This includes historical facts, major market influences and other important factors that every trader should know before trading the AUD/JPY.
Day traders: Traders in search of short-term gains, should strongly consider this currency pair. Even small fluctuations can lead to significant returns.
Diversification seekers: Traders who are already heavily invested in currency pairs, may want to minimise some of their potential risk by adding the AUD/JPY to their portfolio.
Believers: Anyone who has a strong opinion, or knowledge of, the Australian or Japanese markets can invest with confidence. They may have a significant advantage over traders with a limited understanding of these markets.
Both currencies are not pegged to one another, indicating that the absence of a fixed rate mechanism will allow each of them to rise and fall almost indefinitely. The close proximity of both markets presents some interesting possibilities, specifically for traders who are awake during, or located in, the business hours of these respective economies.
Arguably the two strongest markets in the eastern hemisphere, Japan and Australia have much in common. Both are advanced markets with innovation and political stability. But there are some key differences.
The Yen is a far older currency, first used in Japan back in 1871. The Australian Dollar is significantly younger, becoming the official currency of the country in 1996.
Australia has become an economic powerhouse in recent years, enjoying an almost Scandinavian style renaissance. Despite rising debt, Australia’s economy is considered stable with more room to grow. This is in contrast with the Japanese market that is more mature and has seen better days. This is not to say Japan is anything but a wealthy nation. Japan enjoyed an unprecedented boom in the 80s, but has not been able to capture the same magic again.
In early 2009, the Aussie was slipping against the Japanese Yen, constantly closing at under 60 in value. Since then, the Yen has gained some ground, but the currency pair has remained relatively flat, without significant long-term fluctuations. The strength of the Australian Dollar and the sluggish Japanese economy have not been enough to result in significant separation. Regardless, day traders continue to enjoy short-term profit opportunities.
Both of these currencies go head-to-head in relatively close time zones, when compared to their counterparts in Europe and North America. As a result, market influencers will affect both currencies at the same time. One major positive is that both the Australian Dollar and the Yen are easy to track. Both countries provide regular updates and reports about the state of their respective economies.
The Royal Bank of Australia’s interest rate decision and the monthly employment figures heavily influence the Australian Dollar. The Yen is impacted by the unemployment rate report, consumer confidence and balance of trade.
The Australian Dollar/Yen are also heavily influenced by the balance of trade between the two countries. Balance of trade is a measure of the amount of goods and services sold by a country to all other countries. Japan is the fourth largest exporter in the world, while Australia is down in 24th place.
As previously discussed, both countries provide multiple reports on a monthly basis to the public. This means traders are never hampered by lack of information or lack of transparency. This is one of the main reasons that some traders find this currency pair so appealing.
The currency market is the most liquid market available. There is always someone to buy or sell and traders can invest with confidence, knowing that they can take advantage of any situation if they so choose.
The markets always even out in the end. This means that there is always a winner and a loser at any given time. With the commitment to constantly learn and improve your trading skills, you can find yourself on the winning side more often than not.
Japan has been accused of propping up zombie banks. Zombie banks are banks that essentially have no cash reserves, often able to survive on charity from central banks and government loans.
Australian debt has climbed alarmingly over the last several years. It is now over 6 trillion American dollars, due to government programs and social obligations.
This question can only be answered by each trader individually. There is no right or wrong answer. However, anyone who is willing to learn about trading, track the Australian and Japanese markets and maintain constant vigilance for potential opportunities, has a chance of becoming a successful trader.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.
Use eToro's advanced risk management tools to protect your positions. Enjoy hassle-free deposits and withdrawals, instant execution of trades and a free $100,000 demo account to practice your strategy.