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Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose.

Japanese yen: weakest currency of the decade

Now in our fifth year of the decade, we analyze the weakest performing major currency: Japanese yen. Find the biggest movers and why JPY has seen such a decline.

Source: Bloomberg

Data current as of 2/15/2024

Key points

  • Dollar up 37.8% vs the yen since 2020: (1:00)
  • 74% of USD/JPY traders are short: (2:55)
  • Pound up 31.0% vs yen since 2020: (4:00)
  • 72% of GBP/JPY traders are short: (5:12)
  • Franc up 51.7% vs yen since 2020: (5:49)
  • 85% of CHF/JPY traders are short: (7:25)
  • Interest rates still negative in Japan: (8:06)

The Japanese yen's performance in the currency market has been under scrutiny, positioning it as one of the weakest currencies in this decade. Let's delve into the factors contributing to the yen's decline by examining its relationship with the US dollar, British pound, and Swiss franc.

USD/JPY surge

Since 2020, the US dollar has experienced a significant upswing of 37.8% against the Japanese yen. In that time, the dollar has hit multiple extremes including a 30-year high above 151.50 late last year. Despite this bullish trend, IG client sentiment data reveals that a substantial 74% of traders engaging in the USD/JPY market have taken short positions - expecting a mean reversion towards more historically normal prices,

GBP/JPY resilience

British pound has demonstrated more consistent gains, with a 31.0% increase against the yen since 2020. GBP/JPY recently traded aboce 190.00 to mark its highest price since 2015. Similar to USD/JPY, a notable 72% of traders in the GBP/JPY market at IG have opted for short positions.

CHF/JPY strength

The Swiss franc has emerged as a robust performer, witnessing a staggering 51.7% growth against the Japanese yen. Earlier this year, CHF/JPY hit an all time high around 171.50, and remains above 170.00. To contextualize the large percentage gain, the pair started the decade around 110.00. Despite this positive trend, an overwhelming 85% of traders at IG in the CHF/JPY market have chosen short positions. Japan's persistent negative interest rates continue to influence trader decisions, illustrating the interconnectedness of monetary policies and currency movements in the forex market.

Interest rate differentials

A key factor behind the yen's weakness is the Bank of Japan's monetary policy. The BoJ has managed to keep interest rates at -0.1% for the past several years, while nearly every other major economy underwent a series of sharp rate hikes. At almost 5.5%, demand to hold US dollars has grown in comparison to JPY, which pays nothing to hold the currency.

In conclusion, the Japanese yen's status as the weakest currency of the decade reflects a complex interplay of economic factors, trader sentiment, and global market dynamics. By analyzing the performance of the yen against key currencies like the US dollar, British pound, and Swiss franc, traders can gain valuable insights into navigating the evolving landscape of currency trading.

How to trade Japanese yen

  1. Open an account to get started, or practice on a demo account
  2. Choose your forex trading platform
  3. Open, monitor, and close positions on JPY pairs

Trading forex requires an account with a forex broker like IG. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.

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