Converting USD/JPY Pips into a Price Change

Summary

This short explanation clarifies how to convert a pip distance into a price level for USD/JPY. Although a pip is commonly 0.0001 for many currency pairs, the convention for yen pairs is 0.01. The different pip size reflects the pair’s quote precision and the fact that the yen is quoted at a much larger numerical scale against the dollar.

Using the stated spot level of 109.36, a move 450 pips lower is a 4.50 price change, giving 104.86. The answer corrects the mistaken use of the non-yen pip increment. Pip conventions can vary with instrument and quoting practice, so the relevant pair’s convention should be checked before translating a derivative strike or distance into a market price.

Key ideas

• For USD/JPY, the pip increment described is 0.01 rather than 0.0001.
• A pip distance must be multiplied by the pair’s pip size to convert it into a quoted price change.
• At the stated spot of 109.36, 450 pips lower corresponds to 104.86.
• Check the instrument’s quoting convention before applying pip arithmetic.

Tags

# What is 450 pips below spot for USD - JPY currency pair?


# What is 450 pips below spot for USD - JPY currency pair?












I'm new to FX derivatives and I'm trying to price a derivative of USD - JPY pair at 450 pips below spot for USD - JPY. Let's assume that the spot is 109.36; would this mean that 450 pips below spot is 109.36 - 0.045 = 109.315?

If this is incorrect, please help me understand the intuition behind pips. I understand that 1 pip is 0.0001 of a movement in spot.

## Answer by Dimitri Vulis (score 1, accepted)

https://quant.stackexchange.com/a/65879

For most currency pairs, 1 pip is indeed 0.0001; however, because USD 1 $\approx$ JPY 100, in this context, 1 pip is larger, i.e. 0.01. So 450 pips is 4.5, and 109.36 - 4.5 = 104.86.

You may find this discussion How is forex price precision (of the actual floating point number) determined? useful.

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