Should You Invest In CAD/JPY?

1. Day traders: Like many other currency pairs, the CAD/JPY is ideal for short-term day traders looking for fast profit opportunities.

2. Those who have a strong opinion of either the Canadian or Japanese economy. This includes positive and negative opinions.

3. Anyone searching for a short-term hedging option. In a nutshell, this means to spread the risk around to multiple sources.

One of the more interesting currency pairs, as they are geographically positioned far from each other. The CAD and the YEN are not usually first on the minds of most traders. Canada and Japan do share some cultural and economic ties and their currencies should not be overlooked by traders.

Canada and Japan combined create a giant economic block, with a GDP of roughly 6.5 trillion U.S. Dollars.

The Canadian Dollar first came into use in 1858. It was originally pegged to the US Dollar at a 1.1 – 1.0 ratio. Canada is a member of the Commonwealth, and thus, accepted use of the British Pound inside its borders until the Second World War.

The Japanese Yen was first used in 1867, after it was signed into law by the Meiji Government. The Yen is the third most traded currency in the world, after the American Dollar and the British Pound.

While performing similarly overall since 2009, the CAD has outperformed the JPY since 2013. 2016 saw a reverse in fortunes that didn’t last long. The major difference between the two currencies is that the Japan economy has seen its growth stunted over the last decade. The Japanese economy grew by just 1.5% in 2017 in contrast to the Canadian economy, that grew by 3.0% over the same period.

There are numerous factors that can influence the movement of currency pairs. Some of these include financial reports, balance of payments, interest rates and more. These two countries have an interesting trade relationship, that could also create movement in their currencies. Canada primarily exports natural resources to Japan, while manufactured goods are mainly sent in the other direction. As with most financial assets, it is prudent to track the financial and political events that could easily create short-term fluctuations in the value of these currencies.

1. Traders will benefit greatly from the liquidity of the currency markets. Buying and selling are never a major obstacle, and the markets can handle any quantity that the trader desires.

2. Both currencies belong to countries with strong financial markets. Albeit for different reasons. Stability, transparency and the rule of law are key when investing. Both Canada and Japan are markets that can be trusted.

3. Currencies are a fantastic direction for traders who are investing mainly in commodities. Additional assets in a portfolio and potentially lower risk and can provide additional profit opportunities.

1. Traders should not shift their focus solely to national events in Canada and Japan. Other market factors can weigh greatly on the performance of the Canadian Dollar and the Yen.

2. Both economies rely heavily on their relationship with the United States. Thus, it is prudent for traders to also examine reports and events coming out of the world’s biggest economy.

3. Trading the Yen effectively may require activity during off work hours in some jurisdictions. For example, a trader located in Europe may occasionally wish to be active during the peak hours of the Japanese market.