Japanese Yen Traders Bracing for Volatility, Brokers Cut Leverage

As the electoral season in Europe ends with the last polls in Germany, we switch focus to the Far East. The Japanese parliament is due for a shakeup as current Prime Minister Shinzo Abe called snap elections earlier this year.

Register now to the London Summit 2017, Europe’s largest gathering of top-tier retail brokers and institutional FX investors

Famous for his policy of 'Abenomics', the current leader of the Liberal Democratic Party (LDP) called the election due to challenging times for his coalition with Komeito.

[gptAdvertisement]

After he became Prime Minister in December 2012, Abe launched a major effort involving the loosening of monetary and fiscal policy. In an unprecedented move, the political pressure on the Bank of Japan to deliver more easing resulted in the country being the world's largest issuer of new bills as a percentage of GDP.

The money printing machine that Abe promised in 2012 has driven the Japanese currency to multi-year lows and resulted in the highest ever trading volumes for Japanese brokers at the time.

Retail Brokers Hike Margin Requirements

At least three retail brokers have announced that they will be increasing margin requirements in the run-up to the election this weekend. FxPro is increasing the requirement to 1 percent (1:100) on all Japanese yen crosses.

Roboforex is introducing a similar limitation with the standard margin requirements on MT5 ECN accounts being increased by a factor of 3. The increase in Standard and Cent Metatrader 4 and 5 accounts is by a factor of 5.

XM is the third brokerage that has officially voiced its concerns about Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term in Japanese yen trading over the weekend. The company has put a cap on Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term at 1:100 (1%) for Japanese yen pairs and 1:50 (2%) for indices.

The changes in the anticipation of volatility events on the part of retail brokers usually result from increased margin requirements on the part of prime brokers.

High leverage is typically used by retail traders to cash in on overnight interest rates. The slow revival of the Japanese yen carry trade has been one of the key aspects of trading since the US Fed lifted rates from the zero bound.