The coronavirus pandemic is fuelling a boom in currency trading by Japanese retail investors, who are discovering that working from home means they can moonlight in the market during the daytime.
Trading volume in margin accounts held by individuals more than doubled last month $9.4tn, just as volatility in the dollar-yen exchange rate spiked and Japan began to get more serious about social distancing.
Japan boasts the world’s most powerful force of retail forex traders, with almost 1mn margin accounts, and the recent change in their behaviour is significant for global markets.
Until now, most of them had been active at night, during European and US trading hours, and their go-to trade was selling the yen to buy high-yielding currencies, often in emerging markets.
One 14-year veteran of Japan’s retail trading scene said that he’d intensified his trading activities since he started to work from home in late February.
“I’ve been looking at charts more often and trading more frequently during the daytime,” said the 40-year-old from Osaka, who is a salesperson for a large information-technology company and asked to be identified only by the given name Ryoma. “The frequency of my intraday trading has increased significantly.”
Trading volume in individual forex margin accounts leaped to 1,015.6tn yen ($9.4tn) in March from 403.1tn yen in February, according to the Financial Futures Association of Japan. Contrary to popular tales of Japanese housewives as the driving force in this part of the market, most of these account holders are middle-age men, who until now typically traded after they clocked off from work.
In China, legions of retail investors have also been active during the lockdown, playing a prominent role in their nation’s domestic stock markets.
There was also a remarkable increase of trading of the yen against the dollar last month, which almost tripled to 721.4tn yen to account for more than 70% of total turnover, data from the futures association show. “Currencies fluctuated quite sharply in March and that became news in Japan, drawing a lot of attention,” said Toshiya Yamauchi, chief manager for foreign-exchange margin trading at Ueda Harlow Ltd in Tokyo. “Interest in FX trading tends to rise when the yen appreciates, as retail traders try to take positions in cheaper foreign currencies while selling the yen.”
Volatility in dollar-yen touched the highest in more than 10 years last month as the Japanese currency rallied to levels last seen in 2016, only to give up its gains just as quickly. The pair were little changed at 107.08 during afternoon trading on Thursday in Tokyo.
While prices have shown signs of stabilising in April, new entrants are still pouring into the market.
“There is an increasing number of investors opening accounts as the bigger swings in dollar-yen has drawn a lot of interest.” said Takuya Kanda, general manager at Gaitame.Com Research Institute, an arm of one of Japan’s major forex platforms.
Kanda said he was also witnessing more trading during the Tokyo session, rather than during London and New York hours, which was the case before.
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