Trading in the Yen

The history of the Yen is particularly interesting and will assist in understanding the advantages of trading it on the Forex.

Indeed, the Yen has been the Japanese currency since 1872. The Yen as we know it today has not always known glory and renown, especially during difficult periods such as that after the Second World War. At this time, the Japanese currency experienced a severe down period and it was not until the Bretton Woods agreement in 1949 that a new rate was fixed between the Yen and the American Dollar.

In the beginning of the 70s, the Yen was re-evaluated after the advent of the floating currency rates in 1973. At this time, the specialists estimated that the Japanese currency was under-valued. But this re-evaluation was not to the satisfaction of the economic governance of the country which, during the 80s, decided to modify its marketing policy to ensure a certain competitivity relative to imports.

However, the rise of the Dollar strongly faded from 1985 which contributed to a new rising trend in the Yen.

To react correctly, the Japanese Central Bank decided to apply a policy of very low directing rates in the 90s in order to keep its position on the world market. This decision had several effects on the Japanese currency.

Indeed, attracted by the very low interest rates, numerous investors started the carry trade practice by using the Japanese currency to make profits uniquely through its interest rates. This behaviour involved massive Yen sales, which indirectly contributed to depreciate once again the currency relative to the other foreign exchange market currencies.

But in 2007, the Yen rose again, mainly because of the additional premiums. So for a few years Japan experienced a low period for its exports. However, for 2 years now, the Yen has become stable and its interest rate is still among the lowest of the market. Therefore, trading in the Yen is an unquestionable advantage, especially in strongly volatile periods or periods of world economic crises. It is undoubtedly for this reason that the Yen is today the third most exchanged world currency.

 

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