I know I have floated ideas around this issue before, but do we need to do more about that hour after the New York close than just talk about it? Flash events are starting to occur a little too frequently in FX markets for some peoples’ liking, so what can we do about it? Actually I think we can do quite a lot – or at least it would be a lot if all the noise around data capabilities isn’t just that – noise.
A report in the Reserve Bank of Australia’s Statement on Monetary Policy looks at the flash event in FX markets on January 3 when the yen appreciated some 3% in a matter of seconds before falling back, but fails to discern a single factor behind the move.
Citing the fragmentation of the FX markets across an increasing number of different platforms, the RBA says “it is difficult to draw firm conclusions on the cause of the flash event”, adding that three factors are likely to have contributed to what it terms the “brief deterioration in market conditions”.
Thomson Reuters (TR) has launched real-time electronic trading of spot Japanese yen and Thai baht cross currency pairs on its Matching platform.
Cross-currency trading in JPY/THB and THB/JPY will be provided on TR’s electronic central limit order book platform to clients in Japan, Thailand and globally.
Recently, Japan’s Ministry of Finance (MOF) and Bank of Thailand (BOT) reached a mutual agreement on initiatives to promote the use of local currencies for trade and investment settlement, which includes, among others, promotion of the direct exchange rate quotation and interbank trading between the Japanese yen and the Thai baht.
The UK’s Financial Conduct Authority (FCA) has fined former Royal Bank of Scotland (RBS) interest rate derivatives trader, Neil Danziger, £250,000 and banned him from performing any function in relation to any regulated financial activity.
Danziger was primarily a forward FX trader on the yen book at the bank but he also was RBS’s substitute submitter for the yen London Interbank Offered Rate (Libor) rate set, the activities investigated by the FCA.
The FCA says it has found that Danziger was “knowingly concerned in RBS’s failure to observe proper standards of market conduct.
SGX has released an article looking at whether the long-standing assumption that the Japanese yen is inversely correlated with Japanese equity indices, and what this means against the current geopolitical outlook.
Conventional wisdom maintains that that a weakening yen leads to stock gains, with benchmarks such as the Nikkei 225 and the Topix Index strengthening as a result.
According to the data presented by SGX, although the correlation between the Nikkei 225 Index and the Japanese yen fluctuates daily, historical evidence over the past four years shows that the inverse correlation theory holds true most of the time.
I don’t think there is anyone out there who doesn’t think the FX market performed well under the stress of the surprise outcome from the UK referendum last week, but I suspect the real test is only just starting. Don’t get me wrong, this is not one of my contrarian columns that will say the […]