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Japanese Yen March 2012 (J6H12)

1.19750s-0.00200 (-0.17%) 8:03P EDT (IMM)
Commodity Price Quote as of Wednesday, Jun 19th, 2013 View Help

Contract Specifications

Symbol J6
Name Japanese Yen (6J)
Exchange IMM
Trading Months March, June, September, December (H, M, U, Z)
Trading Unit JPY 12,500,000
Tick Size 0.000001 points ($12.50 per contract)
Daily Limit None
Trading Hours 5:00p.m. - 4:00p.m. (Sun-Fri) CST
Last Trading Day Second business day preceding third Wednesday of expiring month
Value of one futures unit $125,000
Value of one options unit $125,000

CRB Yearbook Description

A currency rate involves the price of the base currency (e.g., the dollar) quoted in terms of another currency (e.g., the yen), or in terms of a basket of currencies (e.g., the dollar index). The world's major currencies have traded in a floating-rate exchange rate regime ever since the Bretton-Woods international payments system broke down in 1971 when President Nixon broke the dollar's peg to gold. The two key factors affecting a currency's value are central bank monetary policy and the trade balance. An easy monetary policy (low interest rates) is bearish for a currency because the central bank is aggressively pumping new currency reserves into the marketplace and because foreign investors are not attracted to the low interest rate returns available in the country. By contrast, a tight monetary policy (high interest rates) is bullish for a currency because of the tight supply of new currency reserves and attractive interest rate returns for foreign investors.

The other key factor driving currency values is the nation's current account balance. A current account surplus is bullish for a currency due to the net inflow of the currency, while a current account deficit is bearish for a currency due to the net outflow of the currency. Currency values are also affected by economic growth and investment opportunities in the country. A country with a strong economy and lucrative investment opportunities will typically have a strong currency because global companies and investors want to buy into that country's investment opportunities. Futures on major currencies and on cross-currency rates are traded primarily at the Chicago Mercantile Exchange.

Dollar - The dollar index in early 2011 extended the sell-off that started in 2010 and posted a new 3-year low of 72.70 in May 2011. That sell-off was caused by (1) reduced safe-haven support for the dollar as the global economy improved after the 2008/09 financial crisis, and (2) poor U.S. interest rate differentials as the U.S. Federal Reserve kept its federal funds rate target locked near zero and engaged in a second quantitative easing program from November 2010 through June 2011. The Fed cut its federal funds rate target to the range of zero to 0.25% in the aftermath of the 2008/09 financial crisis, but the European Central Bank (ECB) never cut its policy rate below 1.00%. In fact in the first half of 2011, the ECB raised its refinancing rate by 25 basis points twice to bring its policy rate to 1.50%, far higher than the U.S. rate. The dollar was also undercut in the first half of 2011 by the soft U.S. economy and by shaken global investor confidence when the U.S. lost its AAA rating from Standard & Poors due to the battle over raising the U.S. debt ceiling.

The dollar index was able to recover modestly in the second half of 2011 due to the improvement in the U.S. economy and due to revived safe-haven demand tied to the worsening European debt crisis. The European debt crisis nearly caused an all-out European systemic banking crisis during 2001, which boosted demand for dollars. The dollar was also boosted in the latter part of 2011 when the ECB in November and December cut its policy rate by a total of 50 basis points to 1.00%, thus causing U.S. interest rate differentials to improve.

Euro - The euro saw some strength in early 2011 due to some temporary optimism about the European debt crisis and strong European interest rate differentials. In fact, the European Central Bank was optimistic enough about the Eurozone economy in the first half of 2011 that it raised its refinancing rate by 25 basis points in April 2011 to 1.25% and then by another 25 basis points to 1.50% in July 2011. The higher refinancing rate drew more global money market cash into Europe to take advantage of comparatively high short-term interest rates, thus boosting the euro. However, the European debt crisis worsened during the year along with the Eurozone economy. When Mario Draghi took over as the new ECB President in November 2011, he quickly took action by cutting the refinancing rate by 25 basis points in November and again in December to 1.00%. The ECB also announced that it would conduct two unlimited 36-month loan operations in December 2011 and February 2012. Those operations flooded the European banking system with liquidity and substantially eased the European debt crisis problems. However, the ECB's interest rate cuts and the flood of 36-month liquidity was bearish for the euro, which sank in the latter part of 2011 and hit a 1-1/4 year low in January 2012.

Yen - The yen continued to strengthen during 2011 with USDJPY falling to a record low of 75.35 yen in October 2011. The yen continued its 5-year strengthening trend in 2011 mainly because of the Japanese trade surplus, which is bullish for a currency. The yen was also boosted in 2011 by the massive Japanese Tohoku earthquake in March 2011, which created the need for Japanese insurance companies to sell foreign assets and repatriate capital to pay insurance claims, thus boosting the yen. The yen maintained its strength during 2011 despite bearish factors such as near-zero interest rates and a massive fiscal debt load.

Articles from the Commodity Research Bureau (CRB) Commodity Yearbook. The single most comprehensive source of commodity and futures market information available, the Yearbook is the book of record of the Commodity Research Bureau, which is, in turn, the organization of record for the commodity industry itself. Its sources - reports from governments, private industries, and trade and industrial associations - are authoritative, and its historical scope is second to none. Additional information can be found at www.crbyearbook.com.
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