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Global currency trade reaches $5.3 trillion a day on Yen turnover

Filed under: Bond Markets |

Foreign-exchange trading surged to an average $5.3 trillion a day in April 2013, boosted by greater yen volumes, the Bank for International Settlements said.

Trading increased 33 percent since the same period in 2010, the BIS said, citing a survey of currency traders it runs every three years. That’s an acceleration from a 20 percent increase in the three years through 2010. The yen had the biggest jump in trading activity among major currencies, while the euro’s role as the second-most traded currency was reduced. Emerging-market currencies increased their share, with the Mexican peso entering the top 10 most-actively traded currencies.

Volumes in the global foreign-exchange market are increasing as traders expand activities in developing nations and banks focus on the currency markets while stricter regulations after the financial crisis threaten earnings from other divisions. Transactions jumped this year as diverging economies stoked increasing swings in exchange rates.

“Post the financial crisis in 2008, foreign exchange has been a very interesting asset class for banks and investors to focus on because of the liquidity and diversity,” said Vincent Craignou, the London-based global head of foreign exchange and precious metals derivatives at HSBC Holdings Plc. “It has also become extremely competitive because a lot of banks have been keen to grow market share.”

The U.S. dollar increased its lead as the most-traded currency in the three years through April, the BIS said. It was on one side of 87 percent of all trades, an increase of 2 percentage points since the previous survey.

Yen trading surged 63 percent between 2010 and 2013, according to the BIS report, with the most notable increase in activity occurring between October 2012 and April 2013. That period preceded the announcement from the Bank of Japan on April 4 that it would buy an unprecedented 7 trillion yen ($71 billion) of bonds a month in an attempt to achieve a 2 percent inflation goal within two years. The yen slid more than 15 percent versus the dollar from the end of September 2012 through end March, and tumbled to the lowest versus the dollar since October 2008 in May of this year.

The role of the Chinese yuan in foreign-exchange trading “surged in line with efforts to internationalize the Chinese currency,” the BIS said. Turnover in the Chinese currency jumped to $120 billion a day from $34 billion a day in April 2010 as it became the ninth most-actively traded currency with a 2.2 percent share of global volumes.

Trading became increasingly concentrated within the world’s major financial centers during the survey period, the BIS report showed. The U.K., U.S., Singapore and Japan accounted for 71 percent of foreign-exchange trading, up from a combined share of 66 percent through April 2010.

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