oussama94
05-28-2017, 00:40
Let’s look at what would happen to the EUR/JPY
during an economic boom, when market
sentiment is positive and risk appetite is high.
During a period of economic growth investors
tend to feel good about taking on increased risk.
One way they can do this is by choosing to
borrow money from Japan (which usually
keeps very low interest rates) and store these
funds in banks abroad where interest rates are
higher – in our example, this is the EuroZone.
Because they feel safe to take on extra risk
which is associated with the euro, they essentially
sell the JPY and buy the EUR, aiming to earn
a profit. This example explains why we often
observe the EUR/JPY rising when economic
sentiment is good and investors have an
appetite for risk.
during an economic boom, when market
sentiment is positive and risk appetite is high.
During a period of economic growth investors
tend to feel good about taking on increased risk.
One way they can do this is by choosing to
borrow money from Japan (which usually
keeps very low interest rates) and store these
funds in banks abroad where interest rates are
higher – in our example, this is the EuroZone.
Because they feel safe to take on extra risk
which is associated with the euro, they essentially
sell the JPY and buy the EUR, aiming to earn
a profit. This example explains why we often
observe the EUR/JPY rising when economic
sentiment is good and investors have an
appetite for risk.