USD/JPY and EUR/JPY Trading Drives June Japanese Forex Volumes

An important trend reversal from previous months as the foreign exchange market heads to a typically slower trading activity period

The Financial Futures Association of Japan has revealed the monthly figures for over-the-counter foreign exchange trading activity during the month of June. The figures were reported materially higher when compared to May, with the total trading volume rising 25 percent to ¥529 trillion ($4.28 trillion).

The most notable increases in trading activity came from the major Japanese yen crosses – the USD/JPY, which added 32.3 percent in June and the EUR/JPY which added just over 50 percent last month. In light of recent moves on the Chinese stock market and the Greek debacle this doesn’t come as a big surprise.

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The USD/JPY added 32.3 percent in June while trading in EUR/JPY shot higher by over 50 percent

The safe haven status of the Japanese yen has played an important role throughout the month as increasing global uncertainty prompted a liquidation of carry trades.

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Activity in the British pound has declined materially in June after a seasonal boost the GBP/JPY and GBP/USD pairs got from the U.K. elections in May.

Looking at the Japanese yen carry trade, the liquidation of positions was apparent with the number of short Japanese yen positions dropping 25 percent, while at the same time long Japanese yen trades increased by 32.9 percent.

The rise in June more than offsets the overall decline in trading volumes registered in May. The Japanese industry remains buoyant as the over-the-counter forex part of trading activity appears to have bottomed out in May.

There are challenges to the outlook ahead however, as the typical summer lull settles over the foreign exchange market. Trading volumes are typically much lower in July and August due to the summer holidays season, when a number of traders take a break.

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