Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR/USD

This is a discussion on Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR/USD within the First Steps forums, part of the Reception category; can someone explain this to me simply? in the real world everything is linked to the Dollar (Fiat currency system) ...

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Old Jul 31, 2013, 8:24am   #1
Joined Jul 2013
Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR/USD

can someone explain this to me simply?

in the real world everything is linked to the Dollar (Fiat currency system) so how can some currency pairs be negative in correlation to eachother?

thanks good people.

Last edited by hybrid; Jul 31, 2013 at 9:21am.
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Old Jul 31, 2013, 10:52am   #2
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

Perhaps rather than ask

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Originally Posted by hybrid View Post
how can some currency pairs be negative in correlation to eachother?

You could ask, is it possible for all currencies (or exchange rates) to be positively correlated to eachother?
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Thanks! The following members like this post: rsh01
Old Jul 31, 2013, 11:00am   #3
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

Perhaps, you better refer to you lecture notes on correlation.
Its easier to read on your own.
Check out some infor about carrytrade too
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Old Jul 31, 2013, 11:03am   #4
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

I've wondered that, myself. The pair does not seem to be named correctly. Should it not be JPN/USD if the chart says 100?
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Old Jul 31, 2013, 12:33pm   #5
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

hybrid started this thread
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Originally Posted by Shakone View Post
Perhaps rather than ask




You could ask, is it possible for all currencies (or exchange rates) to be positively correlated to eachother?
But it is possible because they are - all are linked to the dollar...which is linked to....nothing.....as the gold standard was abolished in the 60s (or 70s).

I am still none the wiser to my original Question
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Old Aug 3, 2013, 9:40am   #6
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

correlations be damned.take them as arbitrary.they are there when they are there and not when they are not.and they are usually not when its become customery wisdom that they are.
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Old Aug 3, 2013, 2:05pm   #7
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

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Originally Posted by hybrid View Post
But it is possible because they are - all are linked to the dollar...which is linked to....nothing.....as the gold standard was abolished in the 60s (or 70s).

I am still none the wiser to my original Question
So start with the correlation between EUR/USD and USD/EUR. Both are 'linked' to the dollar. Next extend the thought to something less trivial, i.e. not just the inverse relationship, but consider more currencies.
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Old Aug 3, 2013, 8:20pm   #8
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

hybrid started this thread
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Originally Posted by Shakone View Post
So start with the correlation between EUR/USD and USD/EUR. Both are 'linked' to the dollar. Next extend the thought to something less trivial, i.e. not just the inverse relationship, but consider more currencies.
ah, a great way of putting it - thank you very much.... i am there now :-) apologies for being slow.
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Old Aug 5, 2013, 1:53am   #9
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

shakones initial comment re flipping your thoughts sums it up well.....or you asked a more retarded question than first thought......

"Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR/USD"

back test for.....lets go wild.......a month, & you will answer the above. wake up?
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Old Aug 7, 2013, 3:01am   #10
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

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Originally Posted by hybrid View Post
Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR/USD
Hi Hybrid,

To understand these correlations, it's first important to know how to read a currency quote. The first currency listed in a currency pair is the base currency. The second currency is the counter currency (AKA the quote currency).

So for USD/JPY, USD is the base currency, and JPY is the counter currency. For EUR/JPY, EUR is the base currency, JPY is the counter currency.

When you look at the chart for a currency pair and see the price rising, it means the base currency is rising in value relative to the counter currency. It is equally correct to say that the counter currency is falling in value relative to the base currency.

Going back to the example of USD/JPY and EUR/JPY, since JPY is the counter currency for both pairs, you will see both pairs rise in value when JPY falls, and both pairs will fall in value when JPY rises.

If you compare USD/JPY and EUR/USD, the one currency both pairs have in common is USD. However, USD is the base currency of USD/JPY, while it's the counter currency of EUR/USD. The means, if USD is rising in value, you will see USD/JPY rise while EUR/USD falls.

I hope that helps.

Jason

Last edited by Jason Rogers; Aug 7, 2013 at 3:10am.
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Old Aug 7, 2013, 3:23am   #11
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

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Originally Posted by Splitlink View Post
I've wondered that, myself. The pair does not seem to be named correctly. Should it not be JPN/USD if the chart says 100?
I used to feel the same when I first read currency quotes, because I kept thinking of the "/" symbol as part of a fraction with the numerator first and the denominator second. However, with currency quotes, it's the reverse. We are saying that 1 unit of base currency is equivalent to so many units of the counter currency. Or with USD/JPY, one unit of USD is equivalent to so many units of JPY.
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Old Aug 8, 2013, 8:27am   #12
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

hybrid started this thread
Quote:
Originally Posted by Jason Rogers View Post
Hi Hybrid,

To understand these correlations, it's first important to know how to read a currency quote. The first currency listed in a currency pair is the base currency. The second currency is the counter currency (AKA the quote currency).

So for USD/JPY, USD is the base currency, and JPY is the counter currency. For EUR/JPY, EUR is the base currency, JPY is the counter currency.

When you look at the chart for a currency pair and see the price rising, it means the base currency is rising in value relative to the counter currency. It is equally correct to say that the counter currency is falling in value relative to the base currency.

Going back to the example of USD/JPY and EUR/JPY, since JPY is the counter currency for both pairs, you will see both pairs rise in value when JPY falls, and both pairs will fall in value when JPY rises.

If you compare USD/JPY and EUR/USD, the one currency both pairs have in common is USD. However, USD is the base currency of USD/JPY, while it's the counter currency of EUR/USD. The means, if USD is rising in value, you will see USD/JPY rise while EUR/USD falls.

I hope that helps.

Jason
well written, and clears up what i now see as something very simple.

still, no such thing as a silly question :-)
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Old Aug 8, 2013, 6:50pm   #13
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

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still, no such thing as a silly question :-)
Quite right! How else would we learn?
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Old Aug 8, 2013, 10:30pm   #14
 
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

interest rate parity- anyone

international exchange rates and targets- krugman

happy reading
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Old Aug 8, 2013, 11:12pm   #15
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Re: Why does the USD/JPY link to the EUR/JPY, but the USD/JPY is negative to the EUR

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Originally Posted by Splitlink View Post
I've wondered that, myself. The pair does not seem to be named correctly. Should it not be JPN/USD if the chart says 100?
Splitlink is this sarcasm or have you been into the snuff again....? USD is the control if quoted first and therefore it is named correctly (i.e. 100 JPY to make a single USD). Just as the Euro is the static control in EUR/USD and you need 1.33 USD to make a single EUR.
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