USD/JPY

The USD/JPY currency pair refers to how many yen can be exchanged for one U.S. dollar, or how many U.S. dollars can be exchanged for one yen. This is a commonly used currency pair and one of the most active in the Forex market. The exchange rate of the USD/JPY currency pair is affected by many factors, including the economic conditions of the two countries, trade relations, monetary policies, market sentiment, etc.

The exchange rate for the USD/JPY currency pair is expressed as USD/JPY, where USD is the currency code for the U.S. dollar and JPY is the currency code for the Japanese yen. For example, if the USD/JPY exchange rate is 140.053, that means one U.S. dollar can be exchanged for 140.053 Japanese yen, or one Japanese yen can be exchanged for 0.00714017 U.S. dollars.

Factors Affecting USD/JPY

Economic factors include the economic performance of the two countries, trade balance, interest rate differences, inflation levels, currency supply and demand, etc. Generally speaking, the better the economic performance, the larger the trade surplus, the higher the interest rate, the lower the inflation, the greater the demand for currency, and the greater the motivation for the currency to appreciate. For example, from the late 1970s to the early 1980s, Japan's economy grew rapidly, its trade surplus expanded, interest rates were higher than those of the United States, and inflation was lower than that of the United States. As demand for the yen increased, the yen appreciated significantly.

Political factors include the policy trends of the two countries, diplomatic relations, geopolitical risks, etc. Generally speaking, the more stable the policy, the friendlier the diplomatic relations, and the lower the geopolitical risk, the more motivation the currency will have to appreciate. For example, from 2013 to 2016, Japanese Prime Minister Shinzo Abe launched "Abenomics" policy measures, including large-scale fiscal stimulus and monetary easing, aimed at promoting the depreciation of the yen to improve export competitiveness.

Market sentiment factors include investors and speculators' expectations of exchange rate trends, risk preferences, hedging needs, etc. Generally speaking, the more bullish the expectations, the higher the risk appetite, and the lower the demand for safe havens, the greater the motivation for currency appreciation. For example, when the global financial crisis broke out in 2008, the yen appreciated sharply as investors and speculators sold dollars and bought back yen to repay debts due to market panic and risk aversion.

How to Invest in USD/JPY?

Foreign Currency Fixed Deposit

This is the simplest and lowest risk way to invest, usually to earn bank fixed deposit interest. You only need to open a foreign currency account at the bank, then exchange Taiwan dollars for US dollars or Japanese yen, and deposit a fixed deposit for a certain period. You can choose the fixed deposit plan that best suits you based on the interest rates and exchange rates of different banks.

Foreign Currency Fund

This is another new way to invest in foreign currencies. You can use Taiwan dollars to purchase foreign currency funds and leave your assets to professionals for management. Foreign currency funds generally have higher returns than fixed deposits, but the disadvantage is that the funds charge certain fees, and the investment risks of different types of funds are also different. Common foreign currency funds include money market funds and currency ETFs. For example, UBS (Luxembourg) USD Fund is a USD money market fund that invests in USD-related products; Yuanta USD Index ETF (00682U) is a USD ETF that tracks the price trend of the USD Index.

Foreign Exchange Margin

This is a high-risk, high-yield investment method suitable for investors with certain experience and risk tolerance. You can open a trading account on a foreign exchange platform, then exchange Taiwan dollars for US dollars or Japanese yen as margin, and use leverage to enlarge your transaction size. You can predict the rise and fall of the USD/JPY currency pair based on market trends and technical analysis, and open and close positions in a timely manner.

What Should You Consider When Investing in USD/JPY?

• Central bank policies of the United States and Japan: Central bank policies will affect interest rate levels and money supply, thereby affecting exchange rate trends. When the central bank adopts easing policy, the exchange rate usually falls; when the central bank adopts tightening policy, the exchange rate usually rises.

• Economic data from the United States and Japan: Economic data reflects the economic performance and prospects of the two countries and will also affect exchange rate trends. When economic data is better than expected, the exchange rate usually rises; when the economic data is worse than expected, the exchange rate usually falls.

• Risk sentiment in the international market: Risk sentiment refers to investors’ confidence and attitude towards the market, which can also affect exchange rate trends. When risk sentiment is high, investors tend to buy high-yielding risk assets, such as the U.S. dollar; when risk sentiment is low, investors tend to buy low-yielding safe-haven assets, such as the Japanese yen.