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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    We exploit previously unpublished data on foreign exchange turnover to analyse the institutional setting in which the currencies of non-Japan Asia are traded.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. 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.
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    3. Guonan Ma & Corrinne Ho & Robert N McCauley, 2004. "The markets for non-deliverable forwards in Asian currencies," BIS Quarterly Review, Bank for International Settlements, June.
    4. Robert McCauley, 2006. "Internationalising a currency: the case of the Australian dollar," BIS Quarterly Review, Bank for International Settlements, December.
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    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. Corrinne Ho & Guonan Ma & Robert N McCauley, 2005. "Trading Asian currencies," BIS Quarterly Review, Bank for International Settlements, March.
    8. 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.
    9. H Rey, 1997. "International Trade and Currency Exchange," CEP Discussion Papers dp0322, Centre for Economic Performance, LSE.
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    11. Paul R. Krugman, 1979. "Vehicle Currencies And the Structure Of International Exchange," NBER Working Papers 0333, National Bureau of Economic Research, Inc.
    12. 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.
    13. Guy Debelle & Jacob Gyntelberg & Michael Plumb, 2006. "Forward currency markets in Asia: lessons from the Australian experience," BIS Quarterly Review, Bank for International Settlements, September.
    14. Jacob Gyntelberg & Philip Wooldridge, 2008. "Interbank rate fixings during the recent turmoil," BIS Quarterly Review, Bank for International Settlements, March.
    15. Jacques Miniane, 2004. "A New Set of Measures on Capital Account Restrictions," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 4.
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    Cited by:
    1. Stefanescu, Razvan & Dumitriu, Ramona, 2013. "Impact of the foreign exchange rates fluctuations on returns and volatility of the Bucharest Stock Exchange," MPRA Paper 47229, University Library of Munich, Germany, revised 04 Apr 2013.
    2. Ahmad, Rubi & Rhee, S. Ghon & Wong, Yuen Meng, 2012. "Foreign exchange market efficiency under recent crises: Asia-Pacific focus," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1574-1592.

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