Currency trading volumes rose globally in October from a year
ago, according to new data from some of the world's biggest central
banks.
The data reflect a revival in foreign-exchange trading amid
heavy betting on the decline of the Japanese yen and expectations
of a wind-down in stimulus from the U.S. Federal Reserve, as well
as an increase in high frequency and retail trading. Average daily
foreign-exchange volume rose to $3.873 trillion in October 2013,
from $3.604 trillion in the previous October, according to reports
published Tuesday.
The data, provided by central banks in Japan, Australia, the
U.S., Singapore, the U.K. and Canada, cover about 75% of currency
trading.
Volumes shot up last year as investors piled into bearish wagers
on the yen, which fell more than 20% against the dollar as the Bank
of Japan adopted a new stimulus program. Last fall, investors also
were shifting from emerging markets into the dollar on expectations
that the Fed was close to initiating a rollback of its
$85-billion-a-month bond-buying program. That announcement came in
December.
Trading volumes had fallen in 2011 and 2012, as investors
struggled to find profitable bets during a stretch where the
Federal Reserve and other central banks had adopted ultra-loose
monetary policies. Their actions, aimed at stabilizing economies
still recovering from the 2008 financial crisis, sapped volatility
from the currency market.
That trend began to reverse last year, helped by course changes
at the Fed and Bank of Japan. Increased activity by smaller banks,
hedge funds and computer-driven trading programs that can buy and
sell currencies in milliseconds also contributed to the increase in
volume, analysts said. Volume stemming from these and other
nontraditional traders has grown by 53% between 2010 and 2013,
according to the Bank for International Settlements.
"Foreign exchange is continuing to gain popularity with retail
investors and hedge funds trying to maximize their profits, and
that is a trend that is likely to continue," said Marc Chandler, a
strategist at Brown Brothers Harriman.
Heavier trading didn't lead to bigger profits for many currency
investors. As of the end of November, currency funds were down
4.71% in 2013, according to the Parker Global Currency Managers
Index, which tracks the performance of funds specializing in
currencies.
Volumes were also down 13% between October and April, the last
time central banks took a snapshot of the market. The April survey
came as the yen was about to cross 100 to the dollar for the first
time in four years; the currency saw milder declines after
that.
In the U.K.--the world's biggest FX trading hub--currency
trading flows rose nearly 11% to $2.234 trillion, from $2.017
trillion in October 2012. London accounts for the biggest share of
global currency trading flows, with a global market share of around
41% according to the Bank for International Settlements, followed
by New York with 19%.
Average daily turnover in the North American foreign exchange
market rose by 2.9% on the year to $816.2 billion, the New York
Federal Reserve's foreign-exchange committee reported.
Daily turnover of the Tokyo foreign-exchange market rose to a
record $372.7 billion in October, from $300.5 billion a year
before. Meanwhile, in Australia daily trading fell to $168.6
billion, down 9% from $186 billion in October 2012. Singapore
reported volume of $282 billion, from $307 billion in October
2012.
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