A look at Japanese Yen Future TradingJapanese Yen Future trading allows a trader to speculate on the price of the Japanese Yen against the US Dollar.The pricing of Yen Futures is a little confusing at first due to the fact that price reflects how many dollars are in one yen. It is more commonly quoted the other way round for ease. For example I am sure you would agree, 103 Yens to 1 US Dollar is much simpler than the inverse which is 0.00970874. The pricing of Yen futures reflects the benchmark interest rate differentials between the US and Japan. At the time of writing the Japanese benchmark rate was 0.5% and 4.25% in the US. As a result of this, the further contracts get increasingly expensive. Let's look at the current prices to demonstrate this:
Of course, if you wanted to short sell the contract, you would benefit from the higher price. Many speculators trade this way to earn on the interest rate differentials. This is known as the carry trade.
Standard contracts are for ¥12,500,000. The nominal value in US Dollars will reflect the USD/JPY exchange rate at the time.
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