Tokyo is the Asian session. Its standing in the world financial sector, due in great part to its trade surplus, makes it the biggest player in the forex market. When you see information for the Asian session or Tokyo session it is often referring to Japan versus other Asian markets. You do not want to discount Japan as the 3rd largest trading session particularly because of yen influences on any given currency pair’s foreign exchange rate. The yen might have less influence than the U.S. dollar; however, it is still a major impact that it has.
Foreign Exchange Rate Details: The Yen Position
The yen sees about 16.50 per cent of all foreign exchange transactions. Approximately 21 per cent of foreign exchange transactions on any pair occur during the Tokyo session. On an average day you will see major currency-pairs move 50 to 75 pips. It does not mean this move happens in one direction or that the average cannot change for any given day. Simply, the foreign exchange rate of major currency pairs like EUR/USD, EUR/JPY, and GBP/JPY are between 50 and 75 pips different for the day. The rate might start at 121.00 and move to 131.00 for a pair before heading to 101.00. It is the average price movement determined by the high and low for the day that is represented in this discussion.
Foreign Exchange Rate Session Details
While much of the focus is on Tokyo for price movements in currency pairs, it does not mean the yen is the only Asian-Pacific currency to focus on. Actually Singapore dollar, Hong Kong dollar, and Australian dollar movements are just as imperative. Notice the Chinese Yuan was not mentioned although you are probably aware it is a big player in the Asian market. The CNY is not publically traded. China allows governments, banks, and international corporations to trade the CNY, but retail investors are not allowed into the market. China has consistently denied public access fearing any retail trader could negatively affect their currency by manipulating the foreign exchange rate. Other currencies are trying to emerge and gain a better hold like the South Korean won, Malaysian ringgit, Thailand baht, and Indian rupee.
Unfortunately they have yet to make a great impact on traders outside of the Asian-Australian sessions.
It is in part due to the Western world focusing more on the big players since more volume and liquidity is found in their currency pairs. Although retail traders do play the Tokyo session most of the participants are still central banks, the Interbank, and commercial businesses.
Liquidity is often limited for long periods of time in the Tokyo session affecting the greater movement of any foreign exchange rate. The stronger pairs are usually AUD/USD, NZD/USD and GBP/USD even in the Asian-Pacific session. Typical traders in the Asian-Pacific sessions look for the range, and during the afternoon just as the market is about to close and the New York session is about to begin traders start to focus on breakout potentials. Yet, most of the investment period is early in the session in terms of liquidity.