What is CHF/JPY?
The CHF/JPY is the forex pair that represents the exchange rate between two strong currencies: the Swiss franc (CHF) and the Japanese yen (JPY). Both the CHF and the JPY are frequently regarded as safe-haven currencies due to their negative interest rates.
If the CHF/JPY exchange rate is 160.67, for example, this means that one Swiss franc is equivalent to 160.67 Japanese yen. Depending on different socioeconomic or geopolitical factors, the exchange rate can fluctuate.
Switzerland is renowned for its stable government, robust banking sector and financial system, as well as its low debt-to-GDP ratio. These factors have contributed to Switzerland's reputation as a safe haven for investors and a hub for international banking. Additionally, the country's strong economy and high standard of living make it an attractive destination for both businesses and individuals seeking stability and prosperity.
Japan is one of the largest economies in the world, having experienced unprecedented growth and expansion after the end of World War II. It exports more than it imports and owns more foreign assets than it owes, making the Japanese yen the third most traded currency in the world after the dollar and the euro.
What affects the price of the CHF/JPY pair?
The value of the Swiss franc relative to the Japanese yen could be affected by several factors, or a confluence of factors, including:
- Economic indicators: Economic factors such as Gross Domestic Product (GDP) growth, inflation rates, employment figures, and trade balances can significantly impact currency prices. Stronger economic performance in Switzerland or Japan can lead to an appreciation of the respective currencies and affect the CHF/JPY exchange rate.
- Interest rates: The future value of the Swiss franc and the Japanese yen are both susceptible to actions taken by their respective central banks, the Swiss National Bank (SNB) and the Bank of Japan (BoJ). Higher interest rates could attract foreign investment, increase demand for a country’s currency, and potentially strengthen its value.
- Political and geopolitical factors: Political events such as elections and new government policies and geopolitical events like wars and social unrest can influence currency values and cause fluctuations in the CHF/JPY exchange rate as investors seek safer or more stable currencies.
- Carry trade: The carry trade strategy could also influence the exchange rate between the CHF and JPY. A carry trade is when investors borrow in a low-interest-rate currency (like the JPY) to invest in a higher-interest-rate currency (like the CHF). Changes in interest rate differentials and market sentiment towards carry trades can affect the demand and supply dynamics of the currencies involved, impacting on the exchange rate.
What to watch out for when trading CHF/JPY?
- Central bank (SNB and BoJ) announcements for interest rates and shifts in monetary policy
- Statistics Switzerland and the Statistics Bureau of Japan (SBJ) for data on Trade Balance, Unemployment Rate, Consumer Price Index (CPI), and Gross Domestic Product (GDP)
- Geopolitical tensions, conflicts, wars, and natural disasters