02 Jan TRADING EDUCATION: NZD JPY
The NZD JPY is known colloquially within forex trading as simply the “Kiwi-Yen”.
The JPY which is known within forex trading as the Yen is the fourth most traded currency. While the Kiwi is only the tenth most-traded currency. Although when you bear in mind the size of the New Zealand economy and its population size (4.6 million people), this is a relatively impressive position.
The NZD tends to see its largest fluctuations due to the ANZ Commodity Price Index, The Global Dairy Trade Index and the Reserve Bank of New Zealand’s interest rate decisions. With both the ANZ Commodity Price Index and the Global Dairy Trade Index capable of causing significant movement within the NZDJPY.
New Zealand is a net food exporter. With Dairy products accounting for 29% of New Zealand’s total exports. As a result, the NZD can be heavily influenced by the Global Dairy Trade Index which is especially true due to the fact the index is published once every two weeks at 14:15 GMT, as the markets move towards afternoon Americas trading.
Due to Japan’s aging population and stubbornly low inflation rates, the JPY can be deeply affected by economic news and events such as interest rate changes, inflation data, unemployment rates and balance of trade data.
As a result, the Bank of Japan will regularly intervene with monetary policy if the Japanese economy is showing signs of weakness or the JPY becomes over inflated. Even experienced forex traders need to be aware of major intervention as markets often price in data from Japan before it has been published.
In terms of the Japanese economy, traders should also take in to account the price of Crude Oil as Japan has no major Crude Oil reserves and as a result relies nearly entirely on imports. To a lesser extent, the price of commodities like Coal, Steel and Aluminium can also play an important role in the price of the NZD JPY, due to the size of the Japanese manufacturing sector.