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The evolution of trading activity in Asian foreign exchange markets

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  • Tsuyuguchi, Yosuke
  • Wooldridge, Philip D.
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    Abstract

    We exploit previously unpublished data on foreign exchange turnover to analyse the institutional setting in which the currencies of non-Japan Asia are traded. Volumes grew rapidly between 2004 and 2007 and the diversity of market participants increased. Nevertheless, liquidity is undermined by foreign exchange controls. For Asian currencies other than JPY, HKD and SGD, non-residents account for a relatively small share of activity and FX swap markets are still in their infancy. Offshore non-deliverable markets have developed in response to controls, causing segmentation in trading activity. Furthermore, Herstatt risk remains high in Asian foreign exchange markets.

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    Bibliographic Info

    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 9 (2008)
    Issue (Month): 4 (December)
    Pages: 231-246

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    Handle: RePEc:eee:ememar:v:9:y:2008:i:4:p:231-246

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    Web page: http://www.elsevier.com/locate/inca/620356

    Related research

    Keywords: Foreign exchange Trading volume Currency controls Emerging markets;

    References

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    1. John D. Burger & Francis E. Warnock, 2006. "Foreign Participation in Local Currency Bond Markets," NBER Working Papers 12548, National Bureau of Economic Research, Inc.
    2. Michael J. Sager & Mark P. Taylor, 2006. "Under the microscope: the structure of the foreign exchange market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(1), pages 81-95.
    3. Krugman, Paul, 1980. "Vehicle Currencies and the Structure of International Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(3), pages 513-26, August.
    4. Disyatat, Piti & Galati, Gabriele, 2007. "The effectiveness of foreign exchange intervention in emerging market countries: Evidence from the Czech koruna," Journal of International Money and Finance, Elsevier, vol. 26(3), pages 383-402, April.
    5. Rey, Hélène, 1999. "International Trade and Currency Exchange," CEPR Discussion Papers 2226, C.E.P.R. Discussion Papers.
    6. Naohiko Baba & Frank Packer & Teppei Nagano, 2008. "The spillover of money market turbulence to FX swap and cross-currency swap markets," BIS Quarterly Review, Bank for International Settlements, March.
    7. Jacob Gyntelberg & Philip Wooldridge, 2008. "Interbank rate fixings during the recent turmoil," BIS Quarterly Review, Bank for International Settlements, March.
    8. Gabriele Galati & Alexandra Heath, 2007. "What drives the growth in FX activity? Interpreting the 2007 triennial survey," BIS Quarterly Review, Bank for International Settlements, December.
    9. Bekaert, Geert & Harvey, Campbell R., 2002. "Research in emerging markets finance: looking to the future," Emerging Markets Review, Elsevier, vol. 3(4), pages 429-448, December.
    10. Jacques Miniane, 2004. "A New Set of Measures on Capital Account Restrictions," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 4.
    11. Jacob Gyntelberg & Eli M Remolona, 2007. "Risk in carry trades: a look at target currencies in Asia and the Pacific," BIS Quarterly Review, Bank for International Settlements, December.
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