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Currency Volumes Surpass Pre-Lehman Peak, BIS Estimates

Foreign-Exchange Trading Surpasses Pre-Lehman Peak
The Bank for International Settlements (BIS), in Basel, Switzerland, acts as a central bank for the world’s monetary authorities. Photographer: Adrian Moser/Bloomberg

March 12 (Bloomberg) -- Currency trading may have risen to a record $5 trillion a day in September, surpassing the peak reached before Lehman Brothers Holdings Inc.’s collapse in 2008, according to the Bank for International Settlements.

Trading then declined to about $4.7 trillion a day in October and is likely to have fallen considerably in early 2012, the Basel, Switzerland-based bank said in a report. The BIS said it derived its estimates from supplementing the data in its foreign-exchange survey, which is undertaken every three years, with information collected from central banks and electronic-trading platforms.

The surveys found currency trading kept increasing in the first year of the financial crisis, climbing to about $4.5 trillion a day in September 2008, shortly before Lehman’s collapse, Morten Bech, a senior economist at the BIS, wrote in the research paper. Average daily trading volume then plunged to $3 trillion in April 2009, he wrote.

“By mid-2009, global foreign-exchange activity had started to pick up again and it rose to $4 trillion a day in April 2010,” Bech wrote. “Our measure shows the foreign-exchange activity may have reached $5 trillion a day in September 2011, before dropping off considerably by the end of the year.”

Trading Surges

Foreign-exchange trading has surged as central banks including the Federal Reserve flooded markets with cash to combat the global financial crisis. Japan intervened to help its exporters after a record earthquake and tsunami a year ago, while the Swiss central bank imposed a cap to stem franc strength in September. Efforts to boost growth by protecting exports started a “currency war,” Brazil Finance Minister Guido Mantega said in September 2010.

The dollar traded at $1.3109 per euro at 8:42 a.m. in London, up 0.1 percent from last week. The greenback slid 0.3 percent to 82.24 yen after rising to 82.65 on March 9, the strongest since April 27.

Bech said the recent data showed London remained the center with the highest volume of foreign-exchange trading, followed by New York.

“The turnover in the United Kingdom dwarfs that of any other market center,” he wrote. “At slightly over $2 trillion per day in April 2011, its reported volume was larger than the other surveyed markets put together.”


Implied volatility of three-month options on Group of Seven currencies as tracked by the JPMorgan G7 Volatility Index climbed to 26.6 percent on Oct. 24, 2008, the most since Bloomberg began compiling the data in 1992. The gauge reached a 15-month high of 15.8 percent on Sept. 23 before falling to as low as 9.71 on Feb. 24.

A lower figure makes investments in currencies with higher benchmark lending rates more attractive as the risk in such trades is that market moves will erase profits.

The BIS report differs from its triennial currency survey, with the next one scheduled for April 2013. In the previous survey published in September 2010, it said the average daily trading volume increased 20 percent from 2007 to $4 trillion.

The BIS supplemented its survey data with information taken from central-bank sponsored industry groups in the U.K., North America, Canada, Singapore, Japan and Australia. It also took data from electronic-trading systems operated by EBS and Thomson Reuters, Hotspot FX and the Chicago Mercantile Exchange.

The BIS also used data from CLS Bank, the New York-based operator of the largest currency-trading settlement system. CLS handled an average of $4.5 trillion per day in 2011, compared with $2 trillion in early 2005, according to the BIS report.

“While good and timely data are available on prices of foreign-exchange instruments, the same is not true for trading activity,” Bech wrote. “In this article, I show how it is possible to leverage alternative sources of FX activity to obtain a timelier grasp of turnover developments.”

The BIS was formed in 1930 and acts as a central bank for the world’s monetary authorities. It has published the triennial survey since 1989.

To contact the reporters on this story: Anchalee Worrachate at; Lukanyo Mnyanda in London at

To contact the editor responsible for this story: Daniel Tilles at

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