It's axiomatic that timing is everything in investing, but here's a new way to use timing to your advantage.
Have you ever suspected that certain currencies just seem to do better in Asian trading, and others in Europe? You're onto something. Paresh Upadhyaya, director of G10 FX strategy at Bank of America Merrill Lynch, has compared currency prices to the time of day the trades took place, and in a just-released report, he finds that different currencies regularly fare better at certain times of a 24-hour trading cycle.
(Note: In order to capture key U.S. data releases, Upadhyaya counts some hours normally included in European trading as part of the U.S. trading day: midnight GMT until 8:00 GMT is Asian trading, 8:00 to 13:00 GMT is U.K. trading, and 13:00 to 24:00 GMT is U.S. trading.)
Among the key patterns:
Why do these patterns persist?
It's hard to know for sure, but Upadhyaya speculates that central-bank buying during business hours in their time zones helps the Aussie, kiwi, and others. And the volatility in London - which is surprising, since London is the locus of the most FX trading - may reflect the fact that more economic data is released during those hours "and more importantly, a large number of participants actively trade during this time zone," Upadhyaya says.
You may find reasons for other patterns too. In the meantime, you've got plenty of fresh fodder for trading ideas.
Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.
Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.
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