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The AUD/JPY Currency Pair (Australian Dollar / Yen) is the exchange rate of Australian Dollar expressed in Yen. It expresses the value of one Australian Dollar in Yen.
The AUD/JPY represents less than 1% of total transactions on the FOREX in 2010. The pair AUD/JPY is deemed to be related to the evolution of gold prices. In fact, Australia is the 3rd largest gold producer in the world and as such, when gold prices decrease, the Australian dollar also decreases.
The Australian dollar has also a strong correlation with the New Zealand Dollar of 96% from 1998 to 2008 parity between the AUD/USD and the NZD/USD pair. This can be explained by the fact that Australia is a preferred business partner because of its proximity. If Australia is economically healthy, exports from New Zealand will increase and this will have a beneficial effect on economic growth.
The pair AUD/JPY has also been influenced for many years by the phenomenon of the carry trade. Indeed, for many years, interest rates were kept at 0% by the Bank of Japan. Australian rates controlled by the Australian central bank have been for many years much higher than Japanese rates. As a result, investors sold heavily the yen to buy Australian dollar which was more profitable.
However, with the crisis, the interest rate differential has narrowed considerably and the phenomenon of the carry trade is no more up to date on this pair. As a result, the yen has appreciated considerably due to the unwinding of carry trades. For a country based on exports such as Japan, this severely penalizes the country's growth.
The pair AUD/JPY is quoted in 2 decimal but you can sometimes find 3 with some brokers. The exchange rate is floating and therefore subject to the law of supply and demand on the interbank forex market. Its daily volatility in 2008 was about 200 pips.
Both central banks linked to the pair Australian Dollar / yen are the Central Bank of Australia for AUD and the Central Bank of Japan (BoJ) for the JPY. Like other central banks, the BoJ intervenes regularly directly on the foreign exchange market to control its currency. Thus, it is not uncommon to see significant upward and downward spikes on the pair reflecting an intervention by the BoJ to depreciate the yen in particular to make increase exports of the country.
The decisions taken by both central banks also have a strong impact on the evolution of the pair AUD/JPY (interest rate changes, asset buyback program ....)
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