By TraderVox.com
Last week, major central banks gave their semiannual reports on foreign exchange turnover. It revealed that though trading improved in the United States, it dipped severely elsewhere. The Chart shows some vital data released.
The report also noted that most of the forex dips were caused by fall in forex swaps. Spot trading however remained strong and even rose by about 2%.
So what caused most nations to record a drop in forex turnover?
Well the Swiss National Bank and the Bank of Japan can carry most of the blame.
It is widely thought that the intervention into the market of these two central banks had an adverse effect on overall market activity. Also note that the Yen and Swiss franc are two of the majors and most widely traded currencies in the market. And with them being closely guarded by their respective central banks, there was a resulting friction in speculation and activity in the markets.
The US as mentioned earlier showed a completely different pattern. As result of increased risk appetite, equity trading in the US went up and this consequently led to an increase in currency exchange activity in the region.
Analysts think we would definitely see a decrease in forex activity come the next report. The bank of Japan and Swiss national bank still have a close eye on their currencies and as a result, we think this will further hamper forex activity. There is little knowledge of when another intervention may occur from either bank but we know possibility of an intervention remains high.
Also with the summer fast approaching and many traders set to go on holidays market activity is set to reduce.
On the other hand, with many fundamental activities going on such as the Greek debt deal nearing a close, trading activity may increase.
The good news is that the general uptrend in the forex market still remains and this recent drop in the forex market can be considered a correction. The next semiannual report will say a lot whether the trend remains intact or has been broken for a down trend.
Article provided TraderVox.com
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