What Is USD/JPY?

USD/JPY is the abbreviation for the currency exchange rate for the U.S. dollar and Japanese yen. The currency pair shows how many Japanese yen, the 澳洲幸运5官方开奖结果体彩网:quote currency, are needed to purchase one U.S. dollar, the 澳洲幸运5官方开奖结果体彩网:base currency. The symbol for the 澳洲幸运5官方开奖结果体彩网:Japanese yen (JPY) is ¥. 

Trading the Pair

The value of the USD/JPY pair is꧅ quoted in Japanese yen per one U.S. dollar. For example, if the pair trades at 150, one 🦂U.S. dollar can be exchanged for 150 yen. The USD/JPY is affected by factors that influence the value of the U.S. dollar and the Japanese yen.

The 澳洲幸运5官方开奖结果体彩网:interest rate differential between the policy rates of the 澳洲幸运5官方开奖结果体彩网:Federal Reserve and the 澳洲幸运5官方开奖结果体彩网:Bank of Japan (BoJ) is an important i😼nfluence on the USD/JPY exchange rate. Higher interest rates make a currency relatively more attractive because they allow owners of assets denominated in that currency to earn a higher yield.

For example, if the 澳洲幸运5官方开奖结果体彩网:federal funds rate were to increase from near zero to 2% while the BoJ's policy rate remained near zero, the dollar would tend to strengthen against the yen because investors could now earn a significantly higher yield in dollar-denominated money markets. In 2022, the yen fell to a 24-year low against the dollar when the BoJ refused to follow other 澳洲幸运5官方开奖结果体彩网:central banks in raising interest rates.

Strong Dollar vs. Weak Yen

Japan's low domestic interest rates amid deflation once turned the yen into a "澳洲幸运5官方开奖结果体彩网:safe haven" currency. Its value tended to rise during periods of market turmoil. At times of market stress, the flow of Japanese investment funds into higher-yielding foreign currencies like the U.S. dollar appreciates the yen against the dollar. This was evident during the Great Recession, which caused the USD/JPY rate to go from 120 in 2007 to less than 90 by 2009.

Conversely, the yen has tended to weaken when risk appetite in financial markets increases. In the years after the 澳洲幸运5官方开奖结果体彩网:Great Recession, the yen slowly depreciated against the U.S. dollar as the global economy recovered. The weakening accelerated in 2013 when the Bank of Japan embarked on large-scale 澳洲幸运5官方开奖结果体彩网:quantitative easing.  

As of 2024, the Japanese yen has fallen more than any other G10 currency. The Bank of Japan did not follow other global central banks hiking after COVID-19, making the yen weak on Japan's monetary policy. The weakness also stems from the country's debt.

The Bottom Line

Currency pairs indicate how much of the quote currency is needed to purchase one unit of the base currency. In USD/JPY, the dollar is the base currency and the yen is the quote currency. The Japanese yen and the U.S. dollar are two of the most traded currencies.