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#1 06-01-2020 21:01:53

johnedward
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From: Paris - France
Registered: 21-12-2009
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BIS report on the forex market

BIS report on the forex market


The latest edition of the central bank survey of foreign exchange and OTC derivatives markets summarises market behaviour as of April of last year, when foreign exchange trading reached a daily volume of $6.5 trillion, a 29% increase from the $5.2 trillion level a few years earlier. The USD continues to be the most traded currency, accounting for 87% of all trades executed, according to the latest report from the Bank for International Settlements (BIS).

Forex is growing again as traders are noticing a worrisome trend

While the growth rate of the total daily turnover in the forex is undeniable and amounts to 30% ($1.53 trillion), the analysis of the different components reveals an interesting correlation. While currency futures and swaps are increasing, spot transactions and currency options are below the levels reported 5 years ago.

Although there is a notable rebound from the lows of 2016, it has not been possible to overcome the historical highs that already existed 7 years ago. The value of cash transactions in 2013 was over $2 trillion per day, in 2016 alone it was $1.59 trillion, and in the current year it has rebounded to less than $2 trillion. The gap is even sharper in the forex, where in 2013 the daily trading volume was $336.79 billion; three years ago it fell to $254.39 billion, and according to the latest data, it now stands at $294.09 billion.

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Moreover, when analysing the percentage share of the various types of instruments in total foreign exchange transactions over the past 24 years, the values are generally similar. The median and average of foreign exchange swaps is 47%, and a disproportion can only be observed in the case of spot transactions. In 8 BIS reports published in recent years, the median of these instruments was 34 per cent of the market share, while the average was 36 per cent, clearly indicating that last year's results (29%) were below average values. London is still in the lead, even though the pound has lost its advantage.

The USD dominates

The predominance of individual currencies is another important issue described in the report. The USD continues to hold a key position, accounting for 87% of all transactions. Compared to just 4 years ago, the importance of the euro increased by 33% and the share of the JPY declined by nearly 5%. However, the currency maintained its third position among the most active trading assets in the foreign exchange market. Once again, the currencies of emerging market economies increased in importance, reaching a 26% share in daily global trading.

While the British pound and the share of USD/GBP in daily forex trading has been declining, the UK and still holds the number one position among the world's largest financial centers. The list hasn't changed much since the last report, yet the UK, the US, Singapore, Hong Kong and Japan are the most active trading locations, with 79% share of all forex trades. In the constant rivalry between the two parts of the pool, the London trading hub has increased its advantage over New York, its share of currency trading increased by 6% to 42% of all currency trading during the period under review. At the same time, the share of trading in the U.S. dropped by 3% to 18%.

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