Global currency trading soars to $7.5 trillion a day, says BIS

Trading in the global foreign-exchange market jumped to an all-time high amid heightened volatility, according to the Bank for International Settlements (BIS).

Average daily transactions in April increased to $7.5 trillion, up 14% from the same month in 2019, the BIS said in its triennial survey. That compares with a growth rate of 30% in 2019 and a contraction of 5% in 2016.

After years in the doldrums, currency volatility has surged as an inflation shock prompted central banks to ratchet up interest rates and Russia’s invasion of the Ukraine roiled financial markets.

Large currency swings created “inventory imbalances” among dealers, forcing them to offload positions in the interdealer market more frequently, according to the Basel, Switzerland-based institution. On the other hand, Covid restrictions in places like China and Hong Kong, may have suppressed the turnover, it said.

“The growth in trading volumes between 2019 and 2022 reflected greater interdealer trading,” BIS said in the report. “This uptick in interdealer trading may have reflected the elevated volatility in currency markets in April 2022.”

At $3.5 trillion, daily trading volume among dealers accounted for 46% of the total global turnover, up from 38% three years ago, according to BIS. In contrast, the market share of trading with “other financial institutions” — a group of customers including non-reporting banks, hedge funds and institutional investors — declined to 48%, from 55%.

The US dollar, which has risen to multiyear highs against other currencies, including the euro and yen, held its place as the dominant tender. It was involved in roughly 88% of all currency trades, little changed over the past decade, BIS said. The euro’s slice fell to about 31%, from 32% three years ago.

Trading in the Chinese yuan increased the most, capturing 7% of the market. It became the fifth most traded currency, up from the eighth place in 2019.

Among currency instruments, swaps continued to gain share accounting for 51% of the total turnover, compared with 49% in 2019, while the share of spot trading fell to 28%, from 30%, according to BIS. Transactions in forwards held steady at 15%.

The BIS survey covered more than 1,200 banks and other dealers across the world. Trading in Russia, which accounted for less than 1% of the global total in 2019, was excluded.

—Bloomberg