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Dow Jones and FXCM Inc. (NYSE: FXCM), a worldwide online provider of currency exchange trading and related services, recently announced their collaborative efforts to launch the Dow Jones/FXCM Yen Index.
The new index measures changes within the value of the oriental yen against a basket of four of the existing most-transacted currencies against the yen: the U.S. dollar, the euro, the Australian dollar and the New Zealand dollar.
The index will be the second to be offered collaboratively by Dow Jones Indexes and FXCM. In May-2011, the two firms launched the DJIA/FXCM Dollar Index.
Both the Dow Jones FXCM Dollar Index and of course the new Dow Jones FXCM Yen Index adhere to a methodology which uses FX quantities as the basis of its calculation, instead of FX spot rates, to enhance transparency. In the goal of mimicking real-world FX portfolio construction, this approach also facilitates usage of the indexes like the basis for a wide range of instruments an example would be ETFs, mutual funds, forwards, futures, swaps, options, and structured products.
“We’re pleased to build upon the success of the existing Dow Jones FXCM Dollar Index by providing investors a comparable index regarding the yen,” said Michael A. Petronella, President, Dow Jones Indexes. “The Japanese currency exchange market will be the biggest in the world, there also is tremendous local and international investor interest in the yen. This index offers investors a unique tool for implementing the currency’s relative value.”
The index is constructed by initially equally weighting the following four Fx pairs: USD/JPY, EUR/JPY, AUD/JPY and NZD/JPY. The index is reset to equal weighting only at rebalancing that occur in the event that the value of any single currency position declines by 90%, or in how it is of qualified structural changes within the marketplace.
The 4 Fx pairs were selected regarding the index primarily based on their liquidity and on real capital flows involving the represented economies. Geographic diversification was another factor considered in selecting the currencies.
If you would like to trade the Yen Index contact your broker and ask them to offer it on their trading platform or visit www.FXCM.com