Citigroup Says Currency Volatility to Rise on Volume Gain

Currency volatility will probably increase this year as trading volumes climb, Citigroup Inc. said, citing trading platform and central bank figures.

Combined average daily volume on currency trading platforms by CME Group Inc., Thomson Reuters Corp. and ICAP Plc was at $381 billion last month, up from $290 billion in December and $339 billion a year earlier, according to data compiled by Greg Anderson, Citigroup’s North American head of Group-of-10 currency in New York.

“The fact that FX volume has accelerated is also a sign that volatility is likely to remain higher than in 2012,” Anderson wrote in a note to clients yesterday.

JPMorgan Chase & Co.’s Group of Seven Volatility Index, based on three-month options on G7 nations’ currencies, closed at 9.65 percent on Feb. 6, a level last seen in July. The gauge dropped to a five-year low of 7.09 percent on Dec. 17.

U.K. currency-trading volumes fell to an average $1.92 trillion a day in October, 5 percent lower than six months earlier, the Bank of England said on Jan. 29, citing its semi-annual surveys. Volumes in the U.S. declined to $794 billion a day in the same period, from $860 billion in the previous survey in April, the Federal Reserve Bank of New York said last month.

Average daily transactions executed by traders in Canada totaled $54 billion in October from $62 billion in April, according to the Canadian Foreign Exchange Committee. Volumes in Tokyo climbed 6.3 percent to $301 billion in October versus six months earlier, Japan’s Foreign Exchange Market Committee said. Its Singapore counterpart also reported an increase of 2.8 percent to $361 billion over the same period.

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