The Risky Venture of Currency Trading

961 Words4 Pages
Currency Trading Currency trading is a very risky venture especially when an investor doesn't understand the market fundamentals. All types of business ventures have associated risks which vary from country to country subject to the financial infrastructure and the monetary policies in place. Other main economic drivers have to be taken into account as they contribute immensely to the stability of the host country's currency against the hard currencies to determine the exchange rates depending on the currency regime in place. Some of the main risks which are associated with currency trading include; volatility, exchange rate risk, credit risk, monetary risk, interest risk and a possibility of government intervention in the financial markets. For purposes of this paper Japan has been picked as the country to be discussed. The Japanese currency is valued in Yen which is the official legal currency and is universally accepted for carrying out major transactions within Japan. The exchange rate between the US Dollar (USD) and the Japanese Yen (JPY) is one USD is equivalent to 78.46 JPY. The average Bid price is 78.46 JPY/USD and the Ask price is 78.47/USD. It therefore means that when a total of $90,000 is converted into JPY, the value is 7,061,730 JPY ( OANDA 2012). Japanese yen has tremendously gained strength against the major currencies of the world. Most investors have in the recent past switched to changing their currencies into Japanese Yen owing to the stability in
Open Document