Call Or Put Options On The USD/JPY Pair?

When the Bank of Japan (BoJ) decided to adopt negative interest rates, it may or may not have anticipated the impact on the JPY and the Nikkei 225. In fact, something rather interesting happened during the time that the Bank of Japan dropped interest rates to -0.1% and the Chinese New Year; a sharp reversal in the Japanese yen took place, and the Nikkei 225 weakened dramatically.

USDJPY

For starters, it is now possible to trade $1 for ¥112.395. The year-to-date performance of the USD has been shoddy, with a decline of -6.59%. If we extrapolate over the course of 1 year, the dollar was trading at a high of ¥125.86. The strengthening of the yen is the result of uncertainty in Asia, notably China, and Japan’s currency being a safe haven asset. However the negative interest rate has had a marked effect on the Japanese yen. For the most part however banks in Japan do not perceive the negative interest rate as a tax – since very little percentage of total bank liquidity is levied at negative rates.

foreign banks

When the Bank of Japan (BoJ) decided to adopt negative interest rates, it may or may not have anticipated the impact on the JPY and the Nikkei 225. In fact, something rather interesting happened during the time that the Bank of Japan dropped interest rates to -0.1% and the Chinese New Year; a sharp reversal in the Japanese yen took place, and the Nikkei 225 weakened dramatically. For starters, it is now possible to trade $1 for ¥112.395. The year-to-date performance of the USD has been shoddy, with a decline of -6.59%. If we extrapolate over the course of 1 year, the dollar was trading at a high of ¥125.86. The strengthening of the yen is the result of uncertainty in Asia, notably China, and Japan’s currency being a safe haven asset. However the negative interest rate has had a marked effect on the Japanese yen. For the most part however banks in Japan do not perceive the negative interest rate as a tax – since very little percentage of total bank liquidity is levied at negative rates.

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