| TOKYO, April 6
TOKYO, April 6 Japanese retail investors have
become a significant force in the trading of the South African
rand, which has been roiled by a political crisis in recent
According to the Tokyo Financial Exchange (TFX), a major
Japanese trading exchange provider for retail margin trading,
the rand came second in both February and March when measured by
numbers of traded lots. The Turkish lira was third in February,
though slipped back to fifth in March.
The rand has edged out more liquid and more stable
currencies like the Australian dollar and the pound. As recently
as July 2016, the rand was only the fifth-most traded on TFX.
Market strategists say the higher yields and greater
volatility of the two currencies had attracted the interest of a
small army of Japanese individual traders who can at times be an
influential factor in parts of the foreign exchange market. They
are particularly important during early Asian hours when there
is little liquidity in the market in such currencies.
TFX roughly holds about a fifth of the 1.7 trillion yen
($15.36 billion) of "margin deposits" in the Japanese retail
currency market, which are sums of money individual investors
put down with their brokers in order to trade.
On March 30, South Africa's President Jacob Zuma fired
finance minister Pravin Gordhan after days of speculation that
had rocked the country's currency and other financial markets.
It is unclear whether most of the Japanese retail traders
lost money or whether by taking short positions a significant
proportion may have come out ahead as the rand plunged.
According to data from the Financial Futures Association of
Japan, at the end of February long positions in the rand-yen
trade held by retail currency traders were more than four times
the short positions at 138 billion yen against 29 billion yen.
The figures for March, though, won't be available until the
middle of April.
Gordhan's dismissal has unsettled financial markets, as he
had a reputation among investors as a source of policymaking
stability. His firing also prompted Standard & Poor's to cut
South Africa's credit rating to junk on Monday.
The South African currency has dropped 3.5 percent against
the yen so far in April, at one stage reaching a low
of 7.9 yen per rand.
Monthly rand/yen chart: reut.rs/2nVxYZz
"Any bargain hunting by Japanese retail buyers are likely to
be overwhelmed in the global markets, where sentiment is firmly
negative towards the rand given its rating issues and political
strife," said Masashi Murata, a senior currency strategist at
Brown Brothers Harriman in Tokyo.
The attraction has partly been South Africa's benchmark repo
rate of 7 percent and Turkey's benchmark, the one-week repo
rate, of 8 percent. The Bank of Japan's uncollateralized
overnight call rate has been stuck near zero percent for much of
the past decade.
The retail investors in foreign exchange usually trade on
margin and are often dubbed "Mrs Watanabes" – a name like
"Smith" in Japan and a term that became popular more than 10
years ago, relying on the image of a typical Japanese housewife
trading currencies at home. Some online foreign exchange
brokers, though, suggest it might sometimes be more accurate to
use the term "Mr Watanabe" as many of their clients are male.
The Turkish lira plumbed a record low of around 29 yen per
lira in January and its recent bounce from the trough
has lost steam, with longer-term charts showing the currency
still firmly in the grip of a downtrend. That is because of
political uncertainty as President Tayyip Erdogan consolidates
his power and the risks stemming from the war in neighbouring
Syria, as well as Turkey's large current account deficit.
Monthly lira/yen chart: reut.rs/2nVvkDe
"Demand for the rand and lira stems mainly from individual
investors who want to earn 'swap points,' more than from day
traders. The yields these currencies offer are very high
compared to domestic stock dividends and bank savings rates, and
that is a huge draw for users of our exchange," said Hironori
Ofusa, director of the margin contracts marketing department at
($1 = 110.7100 yen)
(Reporting by Shinichi Saoshiro; Editing by Martin Howell)