The world’s biggest currency traders are reporting a jump in volumes in 2013 as a slide in the yen, pound and Swiss franc increase anticipation of future price swings to a five-month high.
Barclays Plc, the third-largest dealer based on Euromoney Institutional Investor Plc data, said this month that volumes for the yen versus the euro climbed to a daily record and trading across all currencies has risen to the most in a year. Citigroup Inc. said turnover in the yen was “very high,” while Deutsche Bank AG, the largest dealer, said a calming of euro-area tensions spurs demand for higher-yielding assets.
The yen is the worst performer this year of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, sliding 5.6 percent, as new Prime Minister Shinzo Abe presses the central bank to boost stimulus to spur growth. The pound declined 3.3 percent.
The Swiss currency slid to the weakest since May 2011 versus the euro on Jan. 18, while sterling depreciated to a 13-month low against the common currency today as demand for safer assets waned.
A gauge of implied volatility for Group-of-Seven currencies compiled by JPMorgan Chase & Co increased to 8.70 percent at 12:02 p.m. London time after rising to 9.19 percent on Jan. 18, the highest level since Aug. 2. The index has climbed from last year’s low of 7.09 percent on Dec. 17, which was the least since July 2007.
“It’s been a very encouraging start to the year in terms of volumes and performance,” Kevin Rodgers, global head of foreign-exchange at Deutsche Bank in London, said in a telephone interview on Jan. 23. “It feels like the market is getting back to a normal level of activity and behavior that you would have seen pre-crisis.”
Volumes for the yen versus the euro rose to a daily record on Jan. 16, Barclays said in an e-mailed note the following day. Overall currency volumes reached the highest daily level in a year on Jan. 15, the company said in a separate note on Jan. 16. Citigroup said daily yen volumes were 110 percent of average on Jan. 16, in its CitiFX Wire report to clients that day.
Foreign-exchange trading volumes slumped last year as central-bank efforts to cap borrowing costs through bond purchases, and in some cases to limit gains in the currencies, stifled price swings.
Deutsche Bank, which is due to report earnings tomorrow, said in October that compressed margins cut foreign-exchange revenue “significantly” in the third quarter. Barclays said last year that currency sales were declining, while fourth-placed dealer UBS AG said profits had been hurt by lower volatility.
U.K. currency-trading volumes fell to an average $1.92 trillion a day in October, 5 percent lower than its previous survey in April, the Bank of England said yesterday, citing a twice-a-year survey of financial institutions.
Average trading volumes in the U.S. and Canada also declined in October from six months earlier, while those in Japan increased, separate surveys from foreign-exchange committees in these countries showed.