If we take a look at the exchange rate market, we will find that rates of the currencies drift freely against each other. This implies that they are always fluctuating. The fluctuations are due to a very simple phenomenon, in and out of a particular currency from a country. This in and out is due to various factors. Perhaps a currency is highly demanded against other currency, which will cause opposite effect on both the currencies, as an example, if Yen is demanded in United States against U.S. Dollar, and U.S. Dollar is sold to get the required quantity of Yen, this would decrease the value of Dollar against Yen and increase would occur in the value of Yen. This demand would be caused due to various factors, like increase in tourism, international trade and speculation. If U.S. citizens are visiting Japan and an increase in coming in the tourism industry of Japan, this would increase the value of Yen.
It is difficult to understand or estimate the time for a particular currency to increase its value, as currencies are in the process of trade 24*7. The factors are also difficult to assess which cause any particular increase or decrease in a particular currency at a particular time.
Profits and Price Fluctuation of Yen
As we have seen that fluctuation is constant in the currency’s value, it doesn’t imply that the trader would earn huge profits only. If these fluctuations are the cause of the profits being made by any investor, the biggest risk present in any type of trade is also these fluctuations and while investing in the currencies, biggest loss making cause is also these fluctuations. It is easy to understand the problems one might face to forecast the currency and lose the profits with uncertain fluctuations.
Though Yen/USD is not stable, still the fluctuations are not so rapid. It is easy to forecast these small fluctuations as in last 52 weeks Yen/USD range is just 105.52 – 125.86, this is just 20.84 Yens up and down in a year.