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The evolution of trading activity in Asian foreign exchange markets

Author

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  • Yosuke Tsuyuguchi
  • Philip D Wooldridge

Abstract

The development of Asian foreign exchange markets has progressed appreciably in recent years. Data from the BIS Triennial Central Bank Survey indicate that the turnover of Asian currencies rose sharply between 2004 and 2007, financial institutions became more important customers, and the participation of non-residents increased. Notwithstanding this progress, the liquidity of Asian foreign exchange markets continues to be undermined by foreign exchange controls. For Asian currencies other than 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 trading activity to fragment. Furthermore, Herstatt risk remains high in Asian foreign exchange markets. Almost all transactions between Asian currencies are executed via the US dollar so, for those trades not cleared through CLS Bank, each leg is settled at significantly different times.

Suggested Citation

  • Yosuke Tsuyuguchi & Philip D Wooldridge, 2008. "The evolution of trading activity in Asian foreign exchange markets," BIS Working Papers 252, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:252
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    References listed on IDEAS

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    Cited by:

    1. Suresh Ramanathan & Kian-Teng Kwek, 2013. "The twin faces of emerging Asia's currency forward markets in an imperfect setting," Applied Financial Economics, Taylor & Francis Journals, vol. 23(18), pages 1433-1446, September.
    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.
    3. He, Dong & Yu, Xiangrong, 2016. "Network effects in currency internationalisation: Insights from BIS triennial surveys and implications for the renminbi," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 203-229.
    4. Sutsarun Lumiajiak & Sirimon Treepongkaruna & Marvin Wee & Robert Brooks, 2014. "Thai Financial Markets and Political Change," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 5-26, July.
    5. Mashkoor, Asim & Ahmed, Ovais & Herani, Dr. Gobin, 2015. "The relationship between Foreign Currency trading and Economic Development: A case Study of Pakistan," MPRA Paper 64482, University Library of Munich, Germany.

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    Keywords

    foreign exchange; trading volume; currency controls;

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