Yen Volatility Resurfaces, but Forwards365™ Offers Traders a Crucial Edge 

The USD/JPY currency pair has long been a focal point for currency hedgers, investors, and traders. The sharp appreciation of the Yen in early August once again brought the Japanese currency into the spotlight, capturing the attention of those who have historically profited—or suffered—from its volatile swings.  

However, insights from our Forwards365™ data suggest that an early warning of this recent volatility could have been within reach. 

Traditionally, the Yen has been known for its lower interest rates compared to other major currencies, with the Swiss franc being one of the few exceptions. This characteristic has made the Yen a preferred funding currency for long positions in higher-yielding assets. While short-Yen, long-carry trades have often delivered attractive returns, these gains are only realized by those who skillfully navigate sudden corrections like the one witnessed in early August. 

Understanding the Yen’s performance typically involves analysing key indicators such as interest rates and currency volatility. Market participants frequently focus on the 2-year and 10-year points on the yield curve for clues about future movements. However, at New Change FX, we believe our advanced tool—Forwards365™—offers a deeper and more reliable level of insight into the Yen and other major currencies. 

Forwards365™ harnesses an extensive dataset, offering multiple forward points for at least 18 currencies across every date out to one year. This robust data allows for a detailed analysis of the intricate relationships between currencies, central bank expectations, and forward basis.  

In a recent analysis, we employed Forwards365™ to examine the forward/forwards from March 18th to June 20th, a period that included two consecutive sets of FOMC and BOJ policy meetings. The flexibility and depth of Forwards365™ enabled us to zero in on this specific timeframe, though other periods could have been equally revealing. 

Our findings, derived from Forwards365™, highlighted how forward/forwards provide a dynamic perspective on how changes in yield differentials interact with spot currency dynamics. A Granger Causality test confirmed that the forward/forwards data was a strong predictor of spot prices, with a p-value of 0.0005—indicating predictive power stronger than 95% of other data samples. 

At NCFX, our mission is to equip clients with neutral, data-driven tools like Forwards365™, empowering them to make more informed decisions. Whether it’s identifying the optimal point on the forward curve to minimize hedging costs or avoiding the perils of a carry trade unwind, Forwards365™ is designed to navigate the complexities of currency markets with precision and confidence. 

To experience the power of Forwards365™ first-hand, we invite you to request a data sample or set up a trial, click here.

For more insights and for real-time updates and insights, follow us on LinkedIn or get in touch with us direct on info@newhchangefx.com.