Intraday seasonality in activities of the foreign exchange markets: Evidence from the electronic broking system

This paper examines intraday patterns of the exchange rate behavior, using the “firm” bid–ask quotes and transactions of USD-JPY and Euro-USD recorded in the electronic broking system of the spot foreign exchange markets. The U-shape of intraday activities (deals and price changes) is confirmed for Tokyo and London participants, but not for New York participants. Activities do not increase toward the end of business hours in the New York market, even on Fridays (ahead of weekend hours of non-trading). Return volatility is found to have intraday patterns similar to those of activities, and volatility and the bid–ask spread is negatively correlated. A negative correlation is observed between the number of deals and the width of bid–ask spread during business hours. It is also found that the concentration of transaction during overlapping business hours between Tokyo and London markets (London and New York markets) may arise from heterogeneous expectations among participants from different regions. J. Japanese Int. Economies 20 (4) (2006) 637–664.