Unfortunately the forex market has not escape the impact of global deleveraging and the failure of Lehman Brothers in 2008. Central banks from around the world have released their semi-annual foreign exchange surveys and based upon all of the reports, forex trading volume decreased significantly between April 2008 and April 2009. Investors large and small have reduced risk with carry trades unwound aggressively. The lack of participation may explain why the major currency pairs have been stuck in a range since the beginning of May. In New York for example, forex spot trading volume fell to the lowest level in more than 3 years.
London remains the most active forex trading center followed by NY and Tokyo. The EUR/USD is still the most actively traded currency pair by far.
Here are some stats (all of data is in billions of U.S. dollars):
London (link to report)
– Britain is the world’s biggest FX trading hub with over a third of global turnover.
– Average daily turnover in forex products fell 20% since October 2008 to $1,356B, down 25% from April 2008
– Majority of decline was attributed to less activity in spot FX which fell 28%
– The most heavily traded currency pair was euro/dollar, which accounted for 32% of total turnover.
New York (link to report)
– Daily FX market turnover fell 26.3% to $527B, the lowest level since October 2005
– Spot transactions dropped 25.2%, Option trades fell 48.4%
Most Heavily Traded Currencies (Spot Transactions) in NY
Tokyo (link to report)
– Daily FX Market Turnover Fell 16 percent
Singapore (link to report)
– Daily Foreign Exchange turnover down 21 percent compared to October 2008
Canada (link to report)
– Daily Foreign Exchange turnover down 11.3 percent, lowest volume since April 2007
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Base on chart above, we can see the unique of foreign exchange (FOREX) trading.
How big the market!
Forex Automatic trading Robots
Looking at the data dont you thing AUD/USD must replace USD/CHF as the top 4 major currency?
As always Kathy a very interesting article.
Even allowing for the large drop in figures traded on FX, it just proves the point that it still remains the most fluid market out there available to traders. The past months have been “infamous” and will long be remembered many years from now. I don’t think any of us FX traders (at whatever level we participate) should push any panic buttons, just be aware of the problems that surround and act accordingly.
Your work is outstanding by the way.
This is potentially ominous news as it indicates that more institutions are sticking to the sidelines by staying in cash. In other words, they don’t trust green shoots.
Still, last Friday’s Commitment of Traders data showed 12 month high net short Dollar and 12 month high net long Aussie. Whenever a trade becomes too crowded on one side, the potential for a reversal increases dramatically.
Hmm.. it is surprising to see GBP/JPY there at only 1%. Kathy, can you comment on that ?
I am sure GBP/JPY is more actively traded in Tokyo but they do not clearly provide these details in their report.
Only some pairs are trending at present (i.e. USD/ZAR, AUD/CAD, USD/PLN), the rest are stuck in consolidations which, as I said months ago, is very good for those who like to trade consolidation patterns. Otherwise, I can’t be bothered. Light crude dropped from 69 to 62 dolars just in three days, there is plenty of room for traders.
I think signal the global shift towards a global currency. I think we are seeing a result of the web and the globalized and democratized access to information. Forex came into existence when Nixon took us off the gold standard. While it maybe a long way a way, or may never happen, this is definitely a sign of a invevitable shift toward a global currency. What will happen to the FOREX market? Will we trade the currencies of emerging nations with more vigor? I think this is the future of FOREX.
I have heard people trying to push real estate/stock market investments towards forex as though it would not be as affected by the current economic trends. This report solidified my belief that forex will be affected just as much as the other markets. Average volumes will grow again as investors gain more confidence in the economy as a whole. Thanks for the input by the way.
Totaly agree , Ive been making a full time living from Forex for 5 years now , I make more in a month then i use to in a year now
Frankly speaking, I’m using mostly EUR/USD and GBP/JPY for trading myself. And that’s just because I can make somehow normal analysis on that currency pairs.
One thought from all this, is it possible in the midst of this storm, that the markets become so confused about which way to turn next, that in fact they don’t turn anywhere and that many key currencies will end up trading in a fairly narrow range?