Wednesday 13 November 2019

UK foreign exchange turnover hits record highs

Mark Carney: first non-Briton appointed governor of Bank of England
Mark Carney: first non-Briton appointed governor of Bank of England

Anirban Nag

Average daily turnover in UK foreign exchange markets jumped to record highs in the six months to April, driven by a surge in dollar/yen trade, a Bank of England survey showed today.

Average daily turnover of spot, outright forwards, non-deliverable forwards, swaps, FX options and currency swaps totalled $2.55 trillion (€1.92 trillion) in April, up 26pc from October 2012 and 19pc from the same period in 2012, the central bank said in its semi-annual survey of the UK foreign exchange market.

Higher foreign exchange turnover generally means higher market trading revenues for banks and can also point to increased international trade in goods and services.

The BoE released the data as part of a global semi-annual survey of FX turnover. London and New York are the world's biggest currency trading centres.

"This is the highest level of turnover recorded since the survey began," the BoE said. "Turnover in the (dollar/yen) pair more than doubled to $503 billion per day, to become the second most traded pair."

In the October survey, when turnover hit its lowest since 2010, sterling/dollar was the second-most actively traded pair after euro/dollar.

Interest in the dollar/yen pair has risen since Japanese Prime Minister Shinzo Abe came to power late last year and pledged to get the economy out of years of deflation.

Subsequently, the Bank of Japan launched a massive bond-buying programme in April as part of its monetary easing programme. This has driven the dollar 13pc higher against the yen while the euro is up 13.5pc so far this year.

Spot FX activity jumped 38pc to $1 trillion a day, up from $730bn in October. The daily turnover in FX swaps also jumped to $1.1 trillion per day, from $938bn in October, while FX options trading rose to $185bn per day.

The results chime with data from FX settlement system CLS Bank and the two major electronic trading systems - EBS, owned by ICAP Plc, and Thomson Reuters.

According to the BoE's survey of 30 financial institutions, trading in the U.S. dollar increased to 86.9pc from 86pc in October. The sum of the percentage shares totals 200pc not 100pc because two currencies are involved in each transaction.

The euro, the second most actively traded currency, saw its share dip to 36.5pc from 41.2pc. Trade in the yen rose to 24.4pc in April 2013 from 15.1pc while the pound's share slipped to 15pc from 16.3pc in October.

Growth and commodity linked currencies like the Australian, Canadian and the Mexican peso all took a lower share of volumes while that of the New Zealand dollar was steady.

Data from CLS Bank, which was also released on Monday, showed global average traded value was at $5 trillion in April, up 12pc from October.


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