Guide on Characteristics of Currencies from USD to JPY
The major currencies around the globe, which are USD, EUR, GBP and JPY have its own unique behavior. For example, changes on interest rates can affect greatly on some of the currencies while it is not a big deal on the others. Other factors such as political and goods and services prices change are also to be considered when trading forex since some currencies are really sensitive to these.
The world’s reserve currency is the US Dollar which means the currency is highly sensitive to interest rates changes. Since the US requires a huge amount of borrowed capital for its operation, it is known as a debtor country. The country is also constantly in a great trade deficit because it does not export as much as it imports.
And when the dollar is weak, this is normally the effect of oil prices going up, because crude oil is one of the most important imports to the country. Changes that occur in government and taxation have also a great impact on USA, hence the country is vulnerable to these changes.
The Euro – EUR
The growth in economic greatly affect the EUR so do interest rates changes.
Since an immense number of countries support the EUR, conflicting political and economic views are inevitable which then results in the EUR growing weak.
The British pound – GBP
The UK has trustworthy and steady economic policy, this makes the GBP a very respected currencies in the world. Because of that, the GBP normally has high interest rate.
Since consumer expenditure is the backbone of the UK’s financial system, this means that when making a trade on the GBP, you need to take into account the sales on retail sector, situation on labor and data on housing.
The Japanese yen – JPY
The economic growth in Japan depends mainly on exporting manufactured merchandise. A large quantity of natural resources such as metals and energy cannot be found in Japan, hence they need to be imported into the country. And due to slow domestic growth, the country has a very low interest rate.
In Forex trading, you can learn to spot opportunities by understanding the characteristics of a currency. By increasing the knowledge of each currency’s characteristic of a country, you will also improve your chance to make profitable trades.
Learning about the regions’ or countries’ economies will indeed take time but in the long run, it will pay off.
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