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How will the yen exchange rate trend in 2021? Is the Japanese Yen a currency worth investing in?

2022-03-22
2051
  How will the yen exchange rate trend in 2021?

  Japan's foreign exchange reserves are very large.It is one of the world's major creditor countries and the main currency of global foreign exchange reserves.As for the yen exchange rate in 2021,no one can predict the future,but we can judge by the recent yen exchange rate.The yen is almost an 8-year cycle,and the important bottoms of the yen index appeared at the end of 1998,the end of 2007 and the end of 2015.

  The Bank of Japan kept its stimulus measures on hold,signaling more delays in the economic recovery as new Prime Minister Fumio Kishida faces his first national election in days.While the Bank of Japan left its policy rate and asset purchase program unchanged on Thursday,it lowered its forecast for economic growth this fiscal year to reflect the hit from a summer surge in coronavirus cases and supply chain problems.It also downgraded its views on exports and production,citing supply constraints.

  The BOJ's decision comes amid calls for government spending to support the economy and Japan's upcoming general election,which will focus on income inequality.While Kishida's ruling coalition is likely to maintain its advantage in Sunday's election,a sub-optimal outcome could put pressure on the new prime minister to expand the size of his promised stimulus package.The Bank of Japan's latest forecast shows core inflation reaching only half of its 2%target by 2023,meaning it is likely to keep policy accommodative for the foreseeable future as other central banks act.

  Is the Japanese Yen a currency worth investing in?

  Japan's long-term low interest rate environment,on the one hand,has led to extremely low financing costs in yen,and the yen is freely convertible,so investors choose to borrow low-interest yen assets to buy high-yield assets.On the other hand,the low interest rate environment also limits the room for the Bank of Japan to continue cutting interest rates.When a global risk event erupts,the downside risks to the world economy intensify,and Japan can avoid being hit hard because of its low interest rates.

  The trade balance has narrowed in recent years as overseas financial investment has increased and manufacturers have set up more factories overseas.Unlike exporters,who typically bring their earnings back to Japan by buying yen,money trapped in factories and overseas investment stays overseas longer.Continued international acquisitions by Japanese companies are driving this trend.Japanese investors looking for high-yielding foreign securities took advantage of a stronger yen to invest abroad,also limiting the yen's gains.Portfolio flow data showed Japanese pension funds bought a record amount of overseas bonds in January.

  How has the exchange rate of the Japanese yen been in the past?

  When the world is in turmoil,the yen rises.During the financial crisis in 2008,the yen rose by 20%;in the European debt crisis in 2010,the yen rose by 10%against the euro.Why does the yen rise in the world crisis?Simply put,the main reason is that the yen's borrowing rate is extremely low.Because the borrowing rate is low,investors around the world like to borrow Japanese yen and invest in other currencies.The investor's income is the interest rate difference between the two.As for the yen exchange rate in 2021,no one can predict the outlook,but we can judge it based on the recent yen exchange rate.

  If the yen's major currency averages close the month below the uptrend line from the 2015 low,and the RSI breaks below the uptrend line from the past 73 months,then this may suggest the yen A new downward cycle will begin,and according to cyclical analysis,the yen could fall by as much as 30%before bottoming out again in 2021.

  Analysis of the trend of the yen at the end of 2021 and the trend in the future

  The depreciation speed of the yen cannot keep up with the dollar.Because the yen is already too low to go any lower.As the dollar economy has not yet improved,the future global economy is not optimistic.As the chief horse of the United States,Japan has been giving The U.S.economy is rubbing its ass.Now that the U.S.economy is not improving,the Japanese economy is likely to become the next victim of the US dollar’s flooding.The yen needs to release water,but there is no more water to put in,so the yen can only be pushed up,is to appreciate first,and then depreciate,the asset bubble blows,between the rise and the depreciation,the asset bubble continues to grow,which is the beginning of Japan's economic collapse.

  In the long run,I feel that the yen still has room to rise,but the yen should have a correction in the short term.Since the beginning of this year,the yen has depreciated very sharply,mainly because Japan raised the consumption tax rate in the first half of last year,and the overall direction tends to appreciate slightly.In the future,for the continuation of government reform,Abe will also push up the trend of the yen,so this round of depreciation brought about by the consumption tax may come to an end,but if Abe stops raising the consumption tax,he may continue to raise the consumption tax to 10%,in that case,the depreciation of the yen may continue.In addition,it should be noted that the yen is a safe-haven currency.When the global risk aversion is triggered,and the Bank of Japan is in order to hedge the impact of the consumption tax increase,the yen will re-enter the stage of shock consolidation At that time,the exchange rate fluctuation of the yen will not be too obvious,thus opening the QQE,which led to the sharp depreciation of the yen in the second half of last year!

  Is the Japanese yen a currency worth investing in?

  The devaluation of the yen has become a national policy of Japan.When the yen depreciates,the Bank of Japan will let it go;and once the yen appreciates sharply,the Bank of Japan will enter the market to intervene.Japan's strong economic strength makes it possible for the Bank of Japan to intervene.Pressure from the Japanese government has also left the Bank of Japan inactive on interest rate policy.Since the 1990s,in order to promote Japan's economic recovery,the Japanese government has adopted the Keynesian deficit policy,continuously expanded government spending,and issued a large number of national debts.The Japanese government naturally hopes to have a loose monetary policy environment to promote the economy.The further growth of the ruling party will gain higher political leverage for the ruling party.The Bank of Japan has relatively limited independence in monetary policy and is greatly influenced by the government,which will keep Japan's interest rate level at a low level for a long time to come.

  Among the broad asset classes,Japan has no significantly undervalued assets.The price-earnings ratio of the Japanese stock market before the New Year's decline was 22 times,ranking high among developed countries.After a 20%decline in 2016,the price-earnings ratio fell to 18 times,which still does not have a significant advantage;After years of decline,the corresponding valuation level(price-to-income ratio)is still higher than that of other developed countries;after the implementation of a huge amount of asset purchases,Japan's long-term government bond yields have fallen to the lowest level in developed countries,ten years Treasury bond yields are just 0.1%.

  How to invest in Japanese yen?

  Today,the yen has become the third most traded currency in the foreign exchange market after the dollar and the euro.The yen,one of the few safe-haven currencies,appreciated sharply during the euro zone sovereign debt crisis,especially after the Swiss franc was pegged to the euro's valuation to prevent further appreciation.

  Historically,the yen has become a safe haven,carry trade and currency hedging tool for international investors.Investors have borrowed in yen since the early 2000s,given the low interest rates of Japanese banks.These borrowed funds are lent in other currencies,such as U.S.dollars,at higher interest rates.By 2007,some estimates pegged the size of the yen carry trade at around$1 trillion before unwinding the position.Between 2008 and 2012,these activities pushed up the yen's valuation against other currencies and severely hurt its export sector.In 2013,Prime Minister Shinzo Abe was elected on a promise to reduce the value of the yen through measures such as quantitative easing,which helped drive down valuations.

  The foreign exchange market offers another option for traders looking to buy and sell the Japanese yen.By using one currency to buy another currency with high leverage(such as 50:1 or higher),traders can realize profits when the currency purchased increases in value relative to the currency used for the purchase.The most common Japanese yen is the USD/JPY pair against the U.S.dollar.Before trading in these markets,international investors should be aware that the leverage involved usually means greater risk.These trades are also usually placed in a dedicated Forex broker account,which may be different from an existing stock broker account.

  How to choose a yen investment platform?

  Ensuring the safety of funds is the premise of trading.You must ensure that your funds are entered into the dealer's account,not directly charged by the brokerage company.Then you must sign a standard agreement,so as to ensure the minimum security of funds.Only when the safety of funds is guaranteed can the trading operations be carried out reasonably.Therefore,the choice of platform is very important.

  The wrong idea of finding an agency

  Many investors will choose local agents when looking for agents.Seeing is believing,and they are relieved a lot.In fact,this is not the case.As long as the agent is legal and formal,it is possible to consult and handle business through the Internet and the agent,and there is no need to do it locally.That is to say,if the local agent you choose is a black platform,he can also short your funds through the Internet.Therefore,when choosing an agent,do not subconsciously think that it is safe to be in the local area.This is a wrong idea.

  Regulators of investment platforms

  When choosing an investment platform,you must find an exchange with strict supervision,so that the funds you put in it are guaranteed.At present,the most trusted regulatory systems are the US NFA and CFTC or the UK FSA,but with the development of the economy,some Australian investment platforms have gradually entered the Chinese market.

  Regular agent

  Most investment platforms have agents.The agent can only know the operation and cannot help you with the operation.If the agent you choose promises you to do the operation on your behalf,then this must be an illegal agent.It is best not to choose such an agent.business,the consequences will be unimaginable.As an investor,your funds are not negotiated with the agent.The agent only provides account opening and consulting services.Don't be deceived by the agent's surface.Investors should trust dealers,not agents.No matter how large the agency company is,if the agency is a black platform,in the end your funds will be put into their pockets.In order to ensure the safety of investors'funds,most platforms will provide agency services.

  Formal trading platform

  After the account is opened,there will be a simulation operation for about a month.This period not only allows you to understand the transaction process,but also allows you to see whether the broker's platform is stable,whether there is slippage,slow quotation speed,and inability to conduct transactions.condition.In this way,you can open a demo account on the platform to test the performance of the platform before choosing a platform.As long as your internet speed is not very slow or poisonous,the regular trading platform feels very simple and smooth to use,and the information is timely and the operation is simple.

  In short,a good platform will not have problems that should not arise when you close a position.Moreover,the customer service of the formal trading platform is also very timely,and will advise you at any time according to market changes.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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