London’s share of global forex volume drops as turnover hits $7.5bn

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Global currency trade jumped 14% between two consecutive triennial surveys, the Bank for International Settlements said, with a surge in swap trading accounting for most of that increase.

The daily volume of foreign exchange transactions in April 2022 stood at $7.7 billion, shows the study by the BIS, known as the bank of central banks. That compares to $6.6 billion a day in 2019.

“The 14% growth since the April 2019 survey was the lowest three-year growth rate of all but two surveys since 2004. changing expectations regarding the path of future interest rates in major advanced economies, rising commodity prices and geopolitical tensions following the Russian invasion of Ukraine. At the same time, Covid-19 restrictions in place in several reporting jurisdictions, including China and Hong Kong SAR, may have suppressed revenue,” the report notes.

The increase in total revenue in foreign currencies is mainly due to the increase in foreign exchange swaps, which are mainly used by market participants for liquidity management and hedging of foreign exchange risks. This figure printed $3.8 trillion in 2022, adding more than $600 billion or 19% more than the previous report’s $3.2 trillion.

This eclipsed a 10% increase in spot transactions, for which the average daily volume increased by $100 billion to $2.1 trillion between 2019 and 2022. Thus, the share of spot transactions in the global FX activity fell 28% in 2022 from $1.98. trillion or 30% in 2019. In contrast, FX swaps continued to gain market share, accounting for 51% of total FX market revenue in April 2022.

In the most comprehensive report on the 24-hour foreign exchange market, which draws many conclusions that are broadly applicable to global markets, the BIS states, in terms of geographical distribution of turnover, that “currency trading continues to be concentrated in the largest financial markets centers.

London retains its role at the heart of global Forex

Indeed, foreign exchange market activity (including spot, forward, currency and options trading) has become increasingly concentrated in these major centres, the five major London, New York, Tokyo, Hong Kong and Singapore reaching 78%. .

Elsewhere in its report, the BIS notes that the ranking of these malls remained unchanged from 2019. But within that there have been notable changes. London remains by far the world’s currency trading capital, although its market share fell from 5% to 38% in April 2022.

The major Asian hubs of Hong Kong, Singapore and Tokyo saw their combined share of trade remain relatively stable after rising slightly from 20% to 21% of the global total. However, business growth among Asian centers diverged. Revenue in Singapore increased to 9% of global revenue in 2022 from 8% in 2019, while that of Hong Kong SAR fell from 8% to 7% and that of Japan to 4 % versus 5%.

The dollar, the euro and the yen retain the first places

In terms of specific currencies in the spot market, the US dollar has strengthened its position as the most dominant currency in the world. The dollar retained its dominant currency status at 88% of all foreign exchange transactions, virtually unchanged from the previous survey.

Meanwhile, the euro’s role in global currency trading has diminished compared to three years ago. The single currency’s share fell to 30% from 33%, the BIS said. It was 39% the same month ten years ago.

Meanwhile, the Japanese yen’s share remained unchanged at 17% and it remained the third most actively traded currency. The pound sterling maintained a market share of 13%.

As in previous surveys, the Chinese renminbi also saw its market share increase to 7%. With a turnover of $526 billion, China’s offshore currency remained the fifth most traded currency, down from eighth place three years ago and ranking just after the British pound.

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