USDJPY: Best Brokers For Trading US Dollar Vs Japanese Yen (USD/JPY)

Our guide to trading USDJPY?

Are you overwhelmed by the jargons in the foreign exchange market? Fear no more. This guide will help you to understand the market.

What is USDJPY?

Forex (FX) is the short name for 'foreign exchange'. It is a market about trading money. Unlike stocks, FX is about measuring one money against another foreign currency. For example, USDJPY is the ticker symbol for the exchange rate between the Japanese Yen against the US Dollar. Specifically, it measures how many Yen convert into one US Dollar. Currently, it takes about 110 Yen to change one US Dollar.

Where can you trade USDJPY?

You certainly can. Forex is a 24-hour, 5-days a week market. Prices never stop blinking. You can trade forex with CFDs futures, forwards, spread bets, or even exchange-traded funds (ETF). Because of this liquidity, there are forex trends that astute traders can exploit.

Read more about these top Forex brokers:

• IG
• XTB
• Spreadex
• Pepperstone
• CMC Markets

Or compare all brokers for Forex trading with our comparison tables 

• Compare spread betting brokers
• Compare CFD brokers
• Compare Forex brokers

What is the major attraction of trading USDJPY?

The Japanese Yen is one of the most traded FX currencies globally. According to the latest Bank of International Settlements (BIS) Triennial Global FX Turnover Survey (Sept 2019, available here), the Japanese Yen is the third most traded currency in the world after the USD and EUR (see below).

Its daily turnover exceeds $1 trillion, one of the three currencies to do so. In other words, most major Yen pairs are highly liquid and the bid-ask spreads are competitive.

You can trade the Japanese Yen in most financial hubs, such as Tokyo, Hong Kong, Singapore, London or New York. Hedging FX exposure with future contracts are routinely done.

Source: BIS (Data as of Apr 2019)

What are the major risks of trading USDJPY?

Despite good liquidity and a deep market, FX rates can sometimes go haywire.

Why? Because of fear and greed, because of algorithmic trading, because of a temporary structural mishap.

For example, earlier in the year the Japanese Yen suffered a 'flash crash' in the early hours of January 3. Prices of USDJPY surged uncontrollably for a few minutes before retracing much of its gains just hours later (see below). Those with stop losses orders are likely to see them triggered, even though that move was temporary.

When trading becomes highly volatile, transaction costs are likely to go up simply because brokers may exit the market temporarily.

The other risk is leverage. Many retail FX accounts lose capital over time because of the overly high leverage. Minute, random price movements decimate accounts equity quickly if traders are caught on the wrong side. Small losses piled up. This can lead to early termination of the account.

What moves the USDJPY price?

A currency is impacted by many factors, primarily monetary policies, fiscal announcements, and technical factors.

For example, during 2012-2016 the direction of the Japanese Yen was propelled by the Bank of Japan. Especially the Yen was driven down by the massive quantitative easing (QQE) policy enacted by the newly-appointed governor Kuroda. From 78 Yen to the Dollar, the rate plummeted to as low as 124 Yen to the Dollar.

Since that low in 2015, the rate has been trading in a 20-Yen range, occasionally falling to 104 on market setbacks.

Note that the Japanese Yen is a 'safe haven' currency. So it tends to strengthen when market uncertainties increase.

What are the costs of trading USDJPY?

Given that FX trading are mainly financial trading - without any underlying currencies changing hands, there are a few trading costs you need to be aware of:

• Commission (if any)
• Bid-ask spread (the difference between buying and selling at any time)
• Rollover costs - this is the cost of rolling over current positions