Things You Should Know Before Trading GYEN Pairs
Recently stablecoins are on the scene due to their ability to minimize volatility. GYEN is one of those stablecoins that is pegged with the JPY.
In this guide, we will break down the difference between USD/JPY and JPY/USD, how they are quoted in forex, and the similarity between stable coins and JPY forex pairs.
How to read currency quotations in FX (forex) trading?
A forex quotation is always composed of two currencies; a currency pair made up of a base and a quote currency.
The base currency is the first component of the pair, while the quotation currency is the second. As we mentioned in the case of USD/JPY, USD is the base currency while JPY is the quote currency.
No matter which currency is the base currency, whether USD or JPY, the base currency always equals 1. For example, if the exchange rate of USD/JPY is 115.00, then the quoted amount, 115.00, is the amount of the quote currency that equals 1 unit of the base currency.
In the order book, there are bid prices and ask prices. The bid price reflects how much you need to sell currency, while the ask price represents how much you require to buy currency.
It is important to keep in mind that the value of the USD/JPY pip fluctuates with the exchange rate. When the USD/JPY exchange rate rises, for example, the pip value in the US dollar falls due to the yen’s weakening.
Difference between USD/JPY and JPY/USD pairs
The abbreviation USD/JPY and JPY/USD represents the currency exchange rate for the US dollar and the Japanese yen.
In the case of USD/JPY, the pair shows how many yen are required to buy one US dollar. Here, JPY is the quote currency, while USD is the base currency.
Conversely, JPY/USD represents how many dollars you need to buy one yen. Here USD serves as the quote currency, while JPY acts as a base currency.
The USD/JPY and JPY/USD are affected by factors that influence the value of the US dollar and the Japanese yen, both in relation to each other and to other currencies.
In comparison to each other, the interest rate differential between the Federal Reserve (FED) and the Bank of Japan (BOJ) will impact the value of these currencies.
For example, when the Federal Reserve intervenes to make the US dollar stronger, the value of the USD/JPY cross can increase due to a strengthening of the US dollar.
On the other hand, the JPY/USD cross can decrease due to the strengthening of the USD. It is one of the major differences between the two pairs.
Many consider USD/JPY as a safe haven when trading both pairs because JPY tends to perform well during financial crises.
How do stable coins relate to FX pairs?
As we mentioned in the beginning, a stablecoin is a digital asset pegged to a stable reserve asset like the fiats or gold.
In comparison to unpegged cryptocurrencies like Bitcoin, stablecoins are meant to minimize volatility. For example, GYEN is a stablecoin that is pegged against the JPY.
Learn more about the first regulated JPY stablecoin, GYEN, in our previous article.
Stablecoins are becoming popular as they try to combine the best of both worlds: cryptocurrencies’ rapid processing and security or privacy of payments and fiat currencies’ volatility-free stable prices.
Let’s find out the similarity between JPY forex pairs and GYEN.
USDC/GYEN and USD/JPY
Stablecoins like USDC and GYEN have consistent price stability, which makes them similar to USD and JPY.
USD and JPY are fiat currencies that central banks back. Like stablecoins, they don’t make wild swings like other cryptocurrencies such as Bitcoin pairs.
Even in dire circumstances where USD or JPY values may fluctuate dramatically, the regulating authorities intervene and regulate currency demand and supply to keep prices stable.
GYEN/USD and JPY/USD
When talking about the similarity between the GYEN/USD and JPY/USD, the stability factor comes into play again.
As GYEN is pegged 1:1 to JPY, GYEN’s fair price will always equal one JPY. Similarly, JPY/USD is based on exchange rates between the two fiat currencies, and chances of it making wild swings are generally low.
As a reference point, when trading GYEN/USD pairs on cryptocurrency exchanges, traders should be expecting a similar price movement as found here.
Bottom line
Currency pegged stablecoins maintain a fiat currency reserve, like the JPY, as collateral to issue a suitable number of tokens. Such reserves are maintained by regulated financial institutions and are regularly audited for adherence to the necessary compliance.
Furthermore, GYEN and ZUSD are monitored by the New York Department of Financial Service, and the company is working diligently to maintain stability in prices.
Stablecoins like GYEN do not swing wildly and are way less volatile than other digital assets like BTC. So, if you are looking to explore digital FX, GYEN could be your first step. Check out where you can get GYEN and the ecosystem around it at our website.
DisclaimerThis content is not financial advice and it is not a recommendation to buy or sell any financial instruments, FX trading, cryptocurrency or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with financial instruments or cryptocurrency involves significant risks.We strongly advise our readers to conduct their own independent research before engaging in any such activities.GMO Trust does not guarantee or imply that any cryptocurrency or activity described in this content is available or legal in any specific reader’s location. It is the reader’s responsibility to know the applicable laws in their country.
