EUR/JPY

When talking to one another, forex traders often use jargon to request pricing or discuss ideas about the market rapidly. One such example is EUR/JPY which is generally spoken “Euro Yen” among forex traders using English. This shorthand notation employs the ISO 4217 standard codes to denote the forex rate of the European Union’s Euro against that of the Japanese Yen.

The EUR/JPY Currency Pair

With respect to the currency pair denoted by EUR/JPY, the European Union’s Euro or EUR is the base currency and so appears first, while the Japanese Yen or JPY is the counter-currency and is written in second place after the slash symbol. Among forex traders, this common market shorthand generally refers to how many Japanese Yen are equivalent to one Euro.

In terms of pip values, this standard forex market notation implies that pips in EUR/JPY are expressed in Japanese Yen terms. Hence, if the EUR/JPY rate is currently trading at a rate of 120.00, then each pip is worth 0.01 Yen per Euro. On a 1 million Euro transaction, this single pip value would amount to 10,000 Yen or 83.33 Euros at an exchange rate of 120.00.

Market spreads in the EUR/JPY currency pair can depend on transaction volume and dealing status, but spreads of anywhere from 3 to 5 pips are fairly common in practice. Although the market in EUR/JPY is highly-liquid, spreads can widen considerably during major news events and important economic data releases.

EUR/JPY is one of the most highly-traded currency pairs in the forex market, ranking first among the so-called “major crosses” and accounting for a significant percentage of forex trading volume worldwide. The primary interbank electronic trading venue for EUR/JPY is EBS or Electronic Broking Services that was created by a group of the biggest global forex market-making banks.

The Euro

The Euro has the code EUR and the symbol “€” and is the European Union’s official currency that was officially adopted in December of 1995, although trading did not commence until the beginning of 1999 when it replaced the ECU at parity. Euro currency did not come into circulation until the beginning of 2002, and it now ranks as the world’s second most popular reserve currency after the U.S. Dollar.

Furthermore, the Euro is used in five more European countries. Also, some countries on other continents, especially in Africa, peg their currencies to the Euro. Overall, this has resulted in about half a billion people either using the Euro or using currencies with exchange rates pegged to it.

The Japanese Yen

The Japanese Yen has the code JPY and the symbol “¥”. It is the official currency of the country of Japan and has been used as legal tender throughout Japan since being adopted in 1871. In addition to bank notes, Japan issues coins in denominations of 1, 5, 50, 100, and 500 Yen that are commonly available in circulation.

In the foreign exchange market, the Japanese Yen ranks third among the most-traded currencies, accounting for approximately 17% of trading volume. The currency is commonly referred to in the forex market simply as the “Yen”.

In terms of its status as a reserve currency, the Japanese Yen currently ranks as the world’s fourth most popular reserve currency after the U.S. Dollar, the E.U.’s Euro, and the U.K.’s Pound Sterling.

As far as the Japanese Yen’s primary sensitivities are concerned, the currency’s value tends to benefit from global economic challenges given the Yen’s status as a safe haven currency, but it can be hurt by higher commodity prices. This is especially true of oil, since Japan is a net importer of that key commodity.