Should You Invest In USD/JPY?

The USD/JPY is the most popular currency pair involving the U.S. and an Asian country. It measures the value of 1 U.S. Dollar in Japanese Yen, and is affected by changes in interest rates in both countries, and how they relate to one-another. The Bank of Japan sets the interest rates in the country, while in the U.S., it is done by the Federal Open Market Committee. Since there is a long-established international trade relationship between the two countries, it could also be affected by changes in multinational corporations who are active both in Japan and the U.S. When investing in this pair, a trader can open a short or long position. When opening a long position, the trader hopes that the ratio between the currencies will shift in favor of the USD, so 1 dollar will be worth more in JPY, thus generating a profit when selling the USD. However, shifts in the currency market are measured in very small units known as pips. A pip is the smallest unit of movement, to the fourth decimal place, meaning each pip equals 0.01%. Since traders wish to capitalize even on these small movements, a lot of capital is required to profit from such a shift. Therefore, investment platforms offer leveraged trading, providing traders with credit at a fixed ratio. Despite taking various stimulus measures to revive its stagnant economy in recent years, Japan has not yet been able to generate enough momentum. At the same time, the U.S. market is booming, with the USD gaining strength and top Wall Street indices breaking records. While the general notion is that this trend will continue, traders should stay well-informed on actions taken by the Japanese government, and market movements in both countries.