The Evolution of Trading Activity in Asian Foreign Exchange Markets

Wooldridge, Philip D.; Tsuyuguchi, Yosuke

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The Evolution of Trading Activity in Asian Foreign Exchange Markets

BIS Working Paper No. 252

33 Pages Posted: 22 Jul 2008 Last revised: 1 Sep 2009

See all articles by Philip D. Wooldridge

Philip D. Wooldridge

Bank for International Settlements (BIS)

Yosuke Tsuyuguchi

affiliation not provided to SSRN

Date Written: May 1, 2008

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We exploit previously unpublished data on foreign exchange turnover to analyse the institutional setting in which the currencies of non-Japan Asia are traded.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.

Keywords: Foreign exchange, trading volume, currency controls

JEL Classification: F31, G12, G15, N25, O24

Suggested Citation: Suggested Citation

Wooldridge, Philip D. and Tsuyuguchi, Yosuke, The Evolution of Trading Activity in Asian Foreign Exchange Markets (May 1, 2008). BIS Working Paper No. 252, Available at SSRN: https://ssrn.com/abstract=1165142