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Forex pairs in this Article » USD/JPY (Bali) - Trading volume in Tokyo remains high, notes Yujiro Goto, FX Strategist at Nomura.

Key Quotes

"FX trading volume declined between April and October 2013, in the NY, London and Singapore markets, but increased in Tokyo over the same period. Average daily turnover in the NY FX market fell 19%, and declined 12% in the London market, according to the Foreign Exchange Committee and the BoE‟s Foreign Exchange Joint Standing Committee. The Singapore Foreign Exchange Market Committee also reported a 14.7% drop in average daily turnover.

"USDJPY trading volume, in particular, fell 36% in the London market. By contrast, trading volume in the Tokyo market rose 7.1% between April and October, the highest volume, according to the Tokyo Foreign Exchange Market Committee. The Tokyo survey also suggests USDJPY trading volume rose 9% between April and October."

"This difference may reflect the fact that recent JPY weakness is supported by Japanese and offshore investors. In H1 2013, USDJPY tended to rise much more aggressively in offshore trading hours than in Tokyo trading hours. JPY weakness was then likely led by foreign investors, especially speculative-type investors."

"However, JPY weakness since Q4 last year looks more balanced. USDJPY has appreciated in Tokyo and offshore trading hours at a similar pace. The survey results show USDJPY trading volume has shifted from the offshore market to the Tokyo market since April, suggesting Japanese investors are now becoming more involved in JPY weakness."

"December MOF flow data showed key Japanese investors flows are becoming more JPY negative. The pace of foreign asset liquidation by pension funds has clearly been slowing, while lifers purchased foreign bonds at the highest pace since April. Toshin momentum is clearly recovering in January as well, while corporate flows remain JPY negative."
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