The Canadian Dollar (CAD) and Japanese Yen (JPY) are among the most stable currencies in the world. However, like with all currencies, they can be affected by a number of different factors. In fact, Canadian Dollar and Japanese Yen fluctuations are a normal part of the global economy. These currencies can be affected by rate changes, as well as supply and demand that can determine currency rates based on monetary flow. This article explains what affects the CAD/JPY.
Check out the current CAD/JPY Rate.
1. Interest rates
Interest rates can affect all currencies, including the Canadian Dollar and Japanese Yen. In fact, the interest rate of these currencies are incorporated into the price of the currency, or the predicted price at a point in the future. Currency rates can rise if interest rates are expected to rise, while currency rates can decrease if interest rates are expected to decrease. Interest rates have effects which influence currency. Currencies of economies that are expanding are favored, especially when it comes to supply and demand. However, a country that has a GDP that is increasing faster than the monetary base it has is increasing the value of its currency. This increase in the value of the currency can be seen in currency rates.
2. Supply and demand
Purchasing power can affect currency rates, and the economy may go through different cycles called ‘inflation’ and ‘recession’. During a recession, the ability of a country like Canada or Japan to purchase goods on the international market can decrease. However, during inflation, the purchasing power of a country increases, which then can increase the value of these currencies. Both Canada and Japan have high purchasing power, and are known for manufacturing many different products which are then exported around the world.
3. Global events
Global and national events can have an effect on a country’s currency. In some countries, war and other events can have a negative effect on their currency. However, as Canada and Japan are both politically stable countries, they are considered good places for businesses to invest. For example, the Canadian cities of Toronto and Montreal are economic powerhouses, and attract foreign investment from businesses around the world. In Japan, cities like Tokyo and Osaka are financial centers, also attracting global trade – which has a positive effect on the Japanese currency. Businesses and financial experts will often keep track of a country’s national policy and other events that may affect their currency rates. They will keep up to date by watching financial news networks, or by reading financial publications on a daily basis.
4. Economic fundamentals
Economic fundamentals can have an affect on the currency of a country. These can include data reports, changes in economic policy within that country, investments, levels of business, and interest rates. When this information is released, it could deter international companies from making investments within that country, and the value of that country’s currency could be affected in a negative way.
The amount of debt that a country owes can also have an effect on their currency. Currency values can be affected when the amount of debt that a country owes is high.