With Japan being a very traditional society, the trading habits of the population have also been quite traditional. Currency pairs including the Japanese yen have always been the top choice for traders in the country. In march this status quo has been broken my the world’s most traded currency pair, the EUR/USD.
The pair has become the second most traded currency pair in Japan after trading volumes surged 199% in a single month. Total trading volumes on the over-the-counter (OTC) foreign exchange market have increased by 9.3% in March to 498 trillion yen ($4.15 trillion) according to data for March published by the Financial Futures Association of Japan (FFAJ).
That said after an adjustment for the two extra trading days in March, the figures are more or less flat month-on-month.
The move has marked a small rebound when compared to the slump in February when trading volumes shed 31% in a single month.
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Trading volumes remain much lower than in January and the preceding months, mainly due to the declining volatility in Japanese yen pairs. With the Bank of Japan seen as unlikely to move its monetary policy at the coming meetings, the quantitative easing program in Europe is taking center stage.
Japanese traders have abandoned some of their favorite carry trade pairs like the USD/JPY, GBP/JPY, AUD/JPY and the CHF/JPY (with the latter probably due to higher margin requirements) and flocked to the euro crosses.
The USD/JPY remained the single most traded currency pair in Japan by a big margin, totaling ¥293 trillion ($2.44 trillion) in March, which is lower by almost 6% when compared to February. The EUR/USD and the EUR/JPY picked up the slack, becoming the second and the third most traded currency pairs together accounting for most of the total monthly increase in volumes – ¥145 trillion ($1.21 trillion).
During the month the short bets on the Japanese yen have been continuously increasing by ¥1 trillion when compared to the previous month.