Depth Missing When Needed in $5.3 Trillion-a-Day Currency Market
- Currency traders pay premium to transact amid violent swings
- Market liquidity falling on regulation, crowded positions
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Turbulent trading that made August the worst month for global equities since 2012 also revealed a widening crack in the world’s largest market-- foreign exchange.
Fabrizio Fiorini, chief investment officer at Aletti Gestielle SGR SpA in Milan, thought he was in luck as the financial turmoil curbed speculation the Federal Reserve would raise interest rates, sparking a stampede of dollar selling. To his dismay, he found that the gap between prices at which traders were willing to buy and sell major currencies had tripled, forcing him to pay a greater premium to purchase the greenback.