What is EUR/JPY?
The EUR/JPY forex trading pair, also known as 'Euppy' (pronounced Yuppy), is one of the most prominent forex trading pairs. It consists of the second and third most traded currencies, the euro (EUR) and the Japanese yen (JPY), and represents the number of yen (the quote currency) required to purchase one euro (the base currency). The EUR/JPY currency pair is considered a "cross" because it is made up of two major reserve currencies but not the US dollar.
The euro is the official currency of the Eurozone, which comprises 19 of the 27 member states of the European Union. It made its virtual debut in 1999, and in 2002, it became a physical currency. The European Central Bank (ECB) oversees its administration, and it serves as a reserve currency and a medium of exchange for international trade.
With a history spanning over 150 years, the Japanese yen is characterised by extremely low-interest rates intended to stimulate economic development. The JPY has become the world's financing currency since it is possible to borrow Yen at low-interest rates to finance higher-yielding ventures.
The yen is an attractive currency for foreign investors due to Japan's current account surplus and reputation for economic stability. In addition, Japan's export-driven economy contributes to the significance of the yen as a key participant in international trade and finance.
What affects the price of the EUR/JPY pair?
The economic performance of the Eurozone, in addition to political events and geopolitical crises, is a significant determinant of euro pricing. Elections, policy changes, Brexit-related developments, tensions between EU member states, and worries about the Eurozone's future all have the potential to affect euro market sentiment.
The Japanese yen is frequently regarded as a safe-haven asset, making it an attractive way to de-risk portfolios during times of financial or economic uncertainty, despite the slow growth of the Japanese economy in recent decades and rising volatility. When equity markets are under pressure, the JPY tends to appreciate.
In contrast, political conflicts with neighbouring Asian nations may increase market volatility, which can contribute to fluctuations in the currency's value. Japan's susceptibility to natural disasters, such as earthquakes and tsunamis, which can considerably disrupt its economy, is another factor influencing the yen's exchange rate with other currencies.
What to watch out for when trading EUR/JPY?
When trading EURJPY, keep an eye out for data releases and statements from influential organisations in Japan, the Eurozone, the European Union, and individual member countries (especially Germany, Europe's largest economy).
- The European Central Bank (ECB) and the Bank of Japan (BoJ) establish policy and Interest Rates
- Eurostat and the Japanese Statistics Bureau provide data on the Trade Balance, wages, EU Average Hourly Labour Costs, Japan Overall Wage Income of Employees, Consumer Price Index (CPI), and Gross Domestic Product (GDP)
- The Japan Meteorological Agency issues potential seismic alerts