Written by Kathy Lien

Tuesday, 29 July 2008

Last year, the Bank of International Settlements announced that FX market volume increased 71 percent between 2004 and 2007 and amidst all of the financial market turmoil, trading is on the rise once again.

The equity, commodity and bond markets have been particularly tough this year, causing many investors to cut back on risk, but in the foreign exchange market, activity has been rising more than ever. New FX daily turnover reports are hot off the presses.

The weakness of the US dollar, rising prices and smaller margins have forced investors and corporations around the world to hedge foreign exchange risk as much as possible. As a result, turnover has increased around the world. In London, which is the global hub for foreign exchange trading, as of April, daily turnover has increased 54% to $1.68 trillion. In NY, volume is up 15% and in Tokyo it is up 25%.

The EUR/USD is the most heavily traded currency followed by GBP/USD and then USD/JPY.

Here are some stats (all in US dollars):

London (Link to FX Volume Report )

- Britain is the world’s biggest FX trading hub with over a third of global turnover.

- Daily FX Market Turnover Increased 54% to $1.68 trillion in April

- The most heavily traded currency pair was euro/dollar, which accounted for $533 billion, or 29 percent of total turnover.

- The next most heavily traded currency pair was sterling/dollar, also known as “cable”, which accounted for 12 percent of volume, or $225 billion.

New York (Link to FX Volume Report )

- Daily FX Market Turnover Increased 15.7% to $71 billion in NY

- Spot Trades Up 43.5%, Option Trades Drop 36.1% to the lowest level since the survey began in 2004

Most Heavily Traded Currencies:

EUR/USD - 33.4% of volume or $131.5 billion of total spot positions

USD/JPY - 15.2% of volume or $59.7 billion

GBP/USD - $42 billion

Tokyo (Link to FX Volume Report for Tokyo )

Daily FX Market Turnover Increased 25% to $3.025 billion in April

Australia (Link to RBA FX Volume Report )

Daily FX Market Turnover Decreased 5 percent to $157.5 billion

Canada (Link to Canada’s FX Volume Report )

Daily Foreign Exchange turnover up 19% compared to a year ago at US $63.6 B

By Kathy Lien, www.kathylien.com