Foreign-Exchange Trading Rises in April, Central Banks Reports Indicate

Foreign-exchange trading jumped during April compared with October as Europe’s debt crisis boosted trading, central banks said in semi-annual surveys posted on their websites.

The data indicate the currency market expanded to more than $4.1 trillion in daily trading from $3.2 trillion in 2007, Mark McDonald, an analyst at HSBC Holdings Plc in London, wrote in a note to clients. Average U.S. daily volume in foreign-exchange instruments was $754 billion in the April survey, an increase of 12 percent from October, the Federal Reserve Bank of New York said. Trading accelerated 15 percent to $1.75 trillion in the U.K. during the same period.

“If you have a big piece of news, such as the Greek debt crisis, there’s more incentive to change your position,” said Paul Robinson, a currency strategist at Barclays Plc in London. “Global growth is continuing and global trade is picking up significantly, which is obviously good for foreign exchange.”

The euro tumbled 9.6 percent so far this year against the dollar as concern the region’s debt crisis may cause the arrangement to break up fueled demand for the U.S. currency as a refuge. The dollar-euro pair was the most-traded in the U.K., according to the London-based Bank of England report, with volume rising to $566 billion a day from $498 billion a day in October.

Three-Year View

Foreign-exchange trading rose 65 percent to $3.2 trillion a day during the three years ended in April 2007, the Bank for International Settlements, Basel, Switzerland, said in its triennial survey. Its next report is due in August this year.

CLS Bank, the operator of the largest currency-settlement system, said the average value of global daily spot foreign- exchange transactions increased 3.3 percent in April from October. Transactions rose to $1.26 trillion a day, from $1.22 trillion in October, CLS Bank said today in an e-mailed statement. The average daily value of currency-swap transactions climbed 8.5 percent to $2.3 trillion, it said.

Currency trading volume in Tokyo increased 16 percent in the 12 months to April to $294.1 billion, according to the Tokyo Foreign Exchange Market Committee.

“Worries on structural problems in euro areas, mainly focusing on fiscal issues, have newly emerged, and this has had a significant impact on the Tokyo foreign-exchange market,” the industry group said on its website.

‘Post-Crisis Stage’

In Canada, the average daily turnover of foreign exchange, which includes spot transactions, outright forwards and foreign exchange swaps, increased 9.4 percent to $57 billion in April, compared with $52.1 billion in October, according to the Canadian Foreign Exchange Committee. April’s turnover totaled $1.2 trillion, compared with $1.1 trillion in October.

On an average daily basis, the volume of spot and outright forwards increased by 33 percent and 20 percent, the committee’s Foreign Exchange Volume Survey said today. Foreign exchange swaps decreased 1 percent.

“We are coming off a post-crisis stage,” said Firas Askari, head currency trader in Toronto at Bank of Montreal’s BMO Capital Markets. “You would expect to see an uptick as markets see a semblance of improvement.”

To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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