The JPY crosses constitute one of
the primary cross families and basically pit the JPY against the other major
currencies. EUR/JPY is the highest volume of the JPY crosses, but the
prominence of the carry trade, where the low yielding JPY is sold and
higher-yielding currencies are bought, has seen significant increases in
GBP/JPY, AUD/JPY, and NZD/JPY trading volume. Those currencies offer the
highest interest-rate differentials against the JPY.
JPY crosses have their pip values
denominated in JPY, meaning profit and loss will accrue in JPY. The margin
requirement will vary greatly depending on which primary currency is involved,
with GBP/JPY requiring the greatest margin and NZD/JPY requiring the least.
In terms of JPY- cross
fundamentals, JPY-based news and events tend to have the greatest impact, but
as we caution earlier, trying to pin down which leg is going to cause the JPY
crosses to move is a risky game. When trading in the JPY crosses, you need to
keep an eye on USD/JPY in particular, due to its relatively explosive
tendencies and its key place as an outlet for overall JPY buying or selling. Be
alert for similar technical levels between USD/JPY and the JPY crosses, as a
break in either could spill over into the other.
