Bloomberg News

U.K. Currency Trading Fell 5% in April From Year Earlier

July 30, 2012

Foreign-exchange average trading volume in the U.K. fell to $2 trillion a day in April, a drop of 5 percent from a year earlier, as the euro-region’s debt crisis deepened.

Average trading volumes in Japan, Australia and Singapore also dropped from April 2011 as rising borrowing costs in Europe’s core and a lack of confidence in the measures designed to stem the crisis damped investors’ willingness to change their positions. The euro fell in April, while Japan’s yen surged as investors sought a haven from the turmoil.

“Given there are long-held short positions in the euro that have been in play for the best part of a year, we’ve had a trend that has not caused too many disturbances,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “Consequently, we’ve had a lower volume of business.” A short position is a bet that an asset will decline in value.

Average daily trading declined 2 percent from October, according to a semi-annual survey published by the Foreign Exchange Joint Standing Committee on the Bank of England’s website today.

Spot Trading

Average spot trading in the U.K. fell 12 percent to $711 billion per day in April, while currency-swaps trading increased 8 percent to $957 billion per day, the survey showed.

ICAP Plc, the world’s largest broker of transactions between banks, said May 7 that the average daily spot currency volume on its Electronic Broking System, or EBS, platform in April was $109.7 billion, down 26 percent from the same month last year.

In June, the average daily currency volume had risen to $137.6 billion, ICAP said July 5. CLS Bank, the New York-based operator of the largest currency-trading settlement system, handled an average 823,449 trading instructions per day in June, up from 740,342 a month earlier, according to a statement the same day.

“The sluggish global economy and euro-zone crisis are inevitably leading to reduced trading volumes,” ICAP Chief Executive Officer Michael Spencer said in a July 11 statement after the broker announced fiscal first-quarter sales fell 9 percent. “The lack of aggressive action to resolve the euro- zone crisis is not helping to normalize financial market activity in the near term.”

Japan Market

The average daily trading volume of foreign currencies in Tokyo fell 7.6 percent to $262.8 billion in April from a year earlier, Japan’s Foreign Exchange Market Committee said, citing a survey of financial institutions.

Average daily turnover in Australia slid 20 percent to $175.7 billion, compared with the same month a year earlier, the Australian Foreign Exchange Committee said today, citing a similar poll.

Foreign-exchange trading in North America fell to $860 billion a day in April, a decrease of 12 percent from October 2011, according to a report released by the Federal Reserve Bank of New York.

Average daily currency transactions executed by traders in Canada advanced 14 percent to $59.6 billion in April, from $52.4 billion in October 2011, according the Canadian Foreign Exchange Committee.

Singapore Volumes

The Singapore Foreign Exchange Market Committee said currency-trading volumes averaged $300 billion a day in April, a 6.7 percent decrease from October.

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, the Bank for International Settlements said March 11.

Trading then declined to about $4.7 billion a day in October and is likely to have fallen considerably in early 2012, the Basel, Switzerland-based bank said in a report.

Deutsche Bank AG kept its position as top foreign-exchange trader for an eighth-straight year in an annual survey by Euromoney Institutional Investor Plc. (ERM)

Citigroup Inc. leapfrogged Barclays Plc and UBS AG to become the second-biggest currency trader, Euromoney said in an e-mailed statement on May 9. Barclays slipped to third place and UBS to fourth, while HSBC Holdings Plc climbed into the top five.

To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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