The USD/JPY is one of the pairs which mostly in trading all around the world. If we compare this currency value one each other, it was affected by the difference of interest rate between the Federal Reserve and The Bank of Japan. The USD/JPY currency has got its ups and downs on the world trading market. But it's shocking enough knowing that this JPY pairs reached its lowest position on the daily level, which is up to 111.65. But then the Greenback could go back to the higher position in about 111.87. But how did it happen actually? The analyst said that this significant upheaval of USD/JPY in a very short time is caused by an anomaly.
The anomaly has appeared in it because of the loss of liquidity. Based on the analyst said, this movement is not related to the strong fundamental or even technical factor. It was purely caused by the bad liquidity that affected USD/JPY in these days. The liquidity problem itself could bring more problem actually.
What Was the Factor That Triggered the Anomaly?
Some people might ask what's the factor that caused the anomaly. Master of Currency Strategy, Masafumi Yamamoto, said that there's no strong stimulant which can support the Greenback movement. So that's why Greenback started to fall down. Besides that, the USD/JPY movement also happened because of the risk-off interest in the equity market in Japan.
But then Yamamoto also said that the strengthening of the Yen towards USD is just a temporary thing. It is happening for a reason. As long as the central banks all around the world still hold up the increase of the interest rate, so the growth of Yen towards USD will not last long as it supposed to be. The central banks all around the world were supporting the asset with higher risk, and this is the reason why USD/JPY increased in a temporary time. Also, the volatility actually rises up after Australia and New Zealand stock exchange has opened in an easter day. but even if that so, the movement in volatility is not so significant.
Liquidity Problem: Result of the Anomaly
As mentioned above that the volatility movement is not really significant because of the minimum liquidity that caused the decrease of USD/JPY too. And this is admitted by some market risk masters. They also warned that in the 27 of April, it could happen a flash crash. It makes sense reminding about the Emperor Akihito demissioner moment. Besides, there is also another important event in Japan which also caused this flash crash. Flash crash can trigger a liquidity crisis. So that's why many masters warned all the brokers to be ready to face this crisis by re-evaluating the system that they have. If they are not ready, then they are going to be in damage.
Another master, Zamboglou said that the minimum of the market liquidity can cause more problem which is the expansion of spread to other Yen cross pair currencies. It especially happens in the rollover period. The demand and supply will be determined by market participation. And it can cause a temporary trend and the price gap.
Factors That Affects the USD/JPY Rate
Actually, the forecast of the USD/JPY impacted by the economic factors, such as export and import matter. As we know that Japan's economy is really reliant on export, so it makes Japan has the ability to intervene in the currency in order to create a good price for their product. Japan, especially the Bank of Japan also intervene in the interest rate.
Bank of Japan tries to keep the interest rate low, and it can make a significant influence on the USD/JPY rate. Japan low-interest rate could definitely make Yen popular as a carry trade. This situation can make the traders sell the Yen to buy higher currencies. The frequent selling of Yen itself can actually keep the value low.