What is NOK/JPY?
The NOK/JPY currency pair represents the exchange rate between the Norwegian krone and the Japanese yen, or the number of Japanese yen needed to purchase one Norwegian krone (the base currency). The "exotic" pair can offer diversification opportunities to forex speculators.
With a history of 150 years, the Japanese yen is distinguished by its exceptionally low-interest rates, which promote economic development. Japan is renowned for its large current account surplus and economic stability. The yen is defined by ultra-low interest rates intended to stimulate economic growth. Since it is simple to borrow yen at low-interest rates to finance higher-yielding projects, the JPY has become the world's financing currency.
The Norwegian krone is issued and regulated by Norges Bank, the country's central bank. The krone has been the official currency of Norway since 1875 when it supplanted the speciedaler.
What affects the price of the NOK/JPY pair?
The price of the NOK/JPY currency pair is affected by a number of factors, including economic indicators, trade relationships, commodity trade, and market sentiment in general. The trade balance between Norway and Japan has a substantial impact on the relative value of their respective currencies. Norway and Japan exchange energy commodities such as oil and liquefied natural gas due to Japan's energy demand and Norway's status as a resource-rich nation. Notably, both nations possess robust seafood industries, with Norway exporting fish fillets to Japan to satisfy its high demand.
As a key player in international commerce and finance, Japan is highly industrialised and has a significant impact on the international stage. The prominence of the yen is a result of Japan's exports, particularly automobiles and electronics. The commercial relationship between Norway and Japan is strengthened by agreements such as the Comprehensive Economic Partnership Agreement (CEPA), despite obstacles such as geographical distance and regulatory disparities.
Due to Norway's substantial energy exports, the price of oil exerts a significant influence over the Norwegian krone. The Norwegian economy is more sensitive to oil price fluctuations due to its reliance on energy-related activities. When oil prices rise, Norway enjoys increased export revenues and a larger trade surplus, which strengthens the krone. Conversely, changes in oil prices have an adverse impact on the yen.
Market sentiment also influences the dynamics of the NOK/JPY currency pair. Political tensions between Japan's neighbouring Asian nations may cause increased market volatility, resulting in fluctuations in the pair's value. Finally, the yen's exchange rate is affected by Japan's vulnerability to natural disasters like earthquakes and tsunamis, which can severely harm the country's economy.
What to watch out for when trading NOK/JPY?
NOK/JPY traders should monitor economic data releases such as GDP growth, employment statistics, inflation, and the trade balances of Norway and Japan. Pay attention to announcements from influential organisations in both nations. These consist of:
- Norges Bank and the Bank of Japan for monetary policy and interest rates
- Statistics Norway and Statistics Bureau of Japan (SBJ) for data on Trade Balance, Unemployment Rate, Consumer Price Index (CPI), and Gross Domestic Product (GDP)
- Natural disasters affecting Japan