Introduction● Japanese is the official currency of Japan.● In the 19th century silver Spanish dollar coins were common South east Asia, the China coast, and Japan.● The spelling and pronunciation “yen” is standard in English.
How to trade Japanese Yen● Japanese Yen is currently trading at 15 year low levels.● A strong yen hurts Japan which is a export driven economy.● US dollar is also attributed to Japanese govt not doing enough to stop to the rise.
Trade Cash Flow● Japan has a trade surplus and is exporting more importing● The strengthening currency could lower exports and increase imports in the long run.● This weakens the U.S. Currency.
Investment Cash Flow● There seems to be a strong demand from non- Japanese assets, especially short-term money market instruments.● The demand for assets outside Japan has definitely not been very strong recetly
Demand for Japanese Assets● Party this could come from foreign reserves diversification. Think about China for example who wants to be less depended on the U.S. Dollar or Euro.● Dollars will be printed than that there will be new Yen printed, will strengthen the Yen.
Trade Example● If I decide to buy Oct YUK calls, it was trading for $1.06, when YUK closed at $83.7● Maximum risk is only $106 and no matter how low USDJPY pair go.● However, if USDJPY rises to even ~86.5 in the next 30 days.
Summary● Repeating what we said above: the cause for the strengthening of the Yen is that the Yen is a that the Yen is a currency with net follows: more Yen are bought then that there are Yen sold.● In an historic perspective, the strengthening of the Yen is nothing new and not unexpected.