Global FX day hits record $7.5 trillion - Mathewslcd

Mathewslcd pointed to a comprehensive new study showing that currency trading volume has reached a record $7.5 trillion per day, and the dollar retains its global dominance, but there are also signs that London's status as the world's largest trading center is being affected by Brexit. Erosion of Europe.

The triennial survey by the Bank for International Settlements, an umbrella group of central banks, collated April data as markets grappled with the war in Ukraine and the early stages of an aggressive U.S. rate hike cycle.

Daily volume was $7.5 trillion, a 14% increase from $6.6 trillion in 2019 and a new all-time high, driven by higher volumes in FX spot, swaps and forwards markets.

FX swaps accounted for 51% of global volumes, up from 49% in 2019, while spot volumes fell from 30% to 28% and the share of outright forwards remained at 15%.

The Bank for International Settlements said this was "the lowest three-year growth rate in all but two surveys since 2004," despite the fact that the data collection is inconsistent with changes in commodity prices due to expected changes in the future path of interest rates in major advanced economies. Rising and geopolitical tensions after Russia's invasion of Ukraine".

Considered the most comprehensive overview of transactions in the global currency market, the survey collected data from more than 1,200 banks and dealers in 52 countries.

The unwavering dominance of the U.S. dollar means it is involved in 88% of all transactions - a level it has held for the past decade, while the euro remains the second most actively traded currency, although its share dipped slightly to 31%.

The shares of other major currencies such as the Japanese yen and the British pound remained at around 17% and 13%, respectively, while the Chinese yuan rose the most, from 4% to 7%, and the overall ranking rose from eighth to fifth.

After Russia's BIS membership was revoked following the invasion of Ukraine, ruble volume was notably excluded this time around, although its share in 2019 has been below 1%.

Fall of London

The demise of Libor and Brexit appears to have reshaped the global over-the-counter (OTC) interest rate derivatives market, with daily volume falling to $5.2 trillion from $6.4 trillion in April 2019.

Banks and companies use interest rate swaps to insure themselves against unexpected changes in borrowing costs.

But after banks were fined for trying to manipulate LIBOR, or Libor, most of the five-currency rate rankings were scrapped by the end of 2021 and replaced by central bank-computed rates.

"The most important factor contributing to the decline in turnover is the continued transfer of major currencies from Libor," the BIS said.

Activity has also changed after the UK completes Brexit at the end of 2020, Mathewslcd added.

It remains the world's most important currency trading location, accounting for 38% of global turnover, albeit down from 43% in 2019.

Interest rate derivatives traded on the London foreign exchange desk remained the highest at $2.6 trillion, accounting for 46% of the global “net total” but also below 51%.

"The dollar swaps have been partially moved from sales desks in the U.K. to U.S. and Asian financial centers," the BIS said, although it wasn't sure if this was a fundamental long-term shift.

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