DEFINITION of 'USD/JPY (U.S. Dollar/Japanese Yen) '
The abbreviation for the U.S. dollar and Japanese yen (USD/JPY) pair or cross for the currencies of the United States (USD) and Japan (JPY). The currency pair shows how many Japanese yen (the quote currency) are needed to purchase one U.S. dollar (the base currency).
Trading the USD/JPY currency pair is also known as trading the "gopher".
BREAKING DOWN 'USD/JPY (U.S. Dollar/Japanese Yen) '
The value of the USD/JPY pair is quoted as 1 U.S. dollar per x Japanese yen. For example, if the pair is trading at 1.50 it means that it takes 1.5 yen to buy 1 U.S. dollar.
The USD/JPY is affected by factors that influence the value of the U.S. dollar and the Japanese yen, both in relation to each other, and to other currencies. For this reason, the interest rate differential between the Federal Reserve (Fed) and the Bank of Japan (BoJ) will affect the value of these currencies when compared to each other. For example, when the Fed intervenes in open market activities to make the U.S. dollar stronger, the value of the USD/JPY cross could increase, due to a strengthening of the U.S. dollar when compared to the Japanese yen.
The USD/JPY tends to have a positive correlation with the USD/CHF and USD/CAD currency pairs because they all use the U.S. dollar as the base currency.