An Introduction to Foreign Exchange Market Hours:
Foreign exchange market hours refers to the non-stop trading of currency on a global level.
A foreign exchange market remains open for 24 hours a day for 5.5 days in a week. The foreign exchange market hoursextend beyond the opening and closing of a local foreign exchange market because the decentralized markets inU.S., Europe and Asia overlap.
Cycle of foreign exchange market hours:
Financial centers and banks continuously trade different currencies throughout day and night except on weekends and holidays. So the business hours of different financial centers overlap.
This can be explained with reference to the international date line located in the western pacific. The foreign exchange markets first open in the Asia-Pacific region with the arrival of day at Wellington followed by Australia,then Tokyo, Singapore and so on.
The business day in the Middle East begins after a few hours and the forex markets of Bahrain and neighboring countries start trading. A few hours later, it is morning in the Europe and European foreign exchange market hours start. Trading in U.S. markets start when it is afternoon in Europe. This marks the completion of one cycle.
The foreign exchange market hours again start in Asia-Pacific when their sun has still not set in U.S. and a new business day begins. So the sun never sets in the foreign exchange market hours except on holidays. This 24 hour market remains open throughout day and night. This provides immense liquidity to the foreign exchange market.
Traders must keep it in mind that the state of market affairs(which depends on various beliefs) can change at any point of time even during off hours and one’s position can be substantially altered due to this adjustment. However another point of importance is that the rate of correction does not remain intact.
There are peak and lean seasons in the foreign exchange market as well. The trading is in full flow when most of the major global markets are open. The global foreign exchange market’s peak hours include the period when both the European and American market are open.
To ward off uncertainties during off hours many dealing institutions have oped for 24 hours monitoring or a shift of responsibility etc.
It is imperative that one dealing in the foreign exchange markets must keep his eyes open and keep a track of latest developments that may impact the market in a good or bad way.