Forex volatility and volumes are rising across the board with the Japanese yen charging sharply higher
We have observed one of the most tumultuous weeks in forex and equity markets in a while and rapidly depreciating emerging markets FX was on the forefront of the news wires. Carry trades have been unwinding and the Japanese yen has marked its biggest daily rise to the US dollar in five months on Friday. Chinese money markets continue to be uneasy and recent policy efforts to boost the Renminbi’s convertibility have made it one of the strongest currencies around.
The same can not be said about the rest of the BRICS as the Russian ruble, Indian rupee, South African rand and currencies vulnerable by current account deficits such as the Turkish lira and the Indonesian rupee have experienced a dramatic fall in rates. All of this is impacting the broad forex market and tempts us to predict that volumes at major retail forex brokerages in the month of January are likely to pick up markedly.
Among first world currencies, the Australian and Canadian Dollars have seen more movement (downward) since New Years that in the entire previous year.
We have already identified that the Japanese yen volatility is directly tied to volumes at major brokerages and ECNs at least since November last year. However this time the direction is reversed as the favored short Japanese yen trades are being covered. Will retail forex traders jump on the familiar bandwagon and use this opportunity to short more yen, or will they join the institutional crowd and head for the exits?
Either way we are firm believers that this month can lead to a marked improvement in FX volumes across the industry. Stay tuned to LeapRate for the latest forex industry volumes reports kicking off next Monday.