The latest round of FX turnover data from a group of the world’s FX Committees show that volumes dipped slightly in October 2018 compared to April last year when they hit a new high mark.

Average daily reported UK FX turnover was $2.6 trillion per day in October 2018. Although this is the third largest turnover figure on record, it represents a 4% decrease from the record high of $2.7 trillion reported in April 2018.

Turnover by instrument was mixed in the UK. Spot increased for the third successive reporting period, gaining 3% compared to April 2018 to reach $775 billion traded per day. This represents a 14.5% year-on-year increase in volume.

Options trading turnover was $155 billion per day in October last year, compared to $134 billion six months prior and $129 billion the year before.

However, these gains were offset by declines in the trading of FX swaps, which were down $157 billion over the sixmonth period last year to $1.2 trillion, contributing the largest absolute fall in turnover since October 2008 and representing an 11% decline from April 2018. However, this is still a 6% increase compared to the $1.13 trillion of average daily turnover (ADV) recorded in October 2017.

According to the UK’s FX Joint Standing Committee (FXJSC) survey, notable gains were seen in Australian dollar and Chinese yuan turnover, which in October were 12% and 17% higher, respectively, compared with six months earlier.

Meanwhile, USD/CNY turnover in the UK increased to $73 billion per day, its highest absolute turnover to date, and overtaking EUR/GBP as the seventh most traded currency pair in London. G4 currency turnover, as measured in US dollar terms, declined slightly during the reporting period: EUR/USD turnover was 6% lower, GBP/USD turnover was 8% lower and USD/JPY fell slightly by 2%, all compared with April 2018.

Commenting on the survey, Roger Rutherford, COO of ParFX, says, “It’s no surprise to see an overall fall in FX turnover reported by the FXJSC, but the variations across different instruments make for interesting reading. For example, the rise in FX spot activity is at its highest since April 2015, with the survey revealing a significant year-on-year increase of 11%. This trend is also reflected in data released by the New York Federal Reserve.

He adds: “The report is an accurate reflection of the bouts of higher volatility in both major and emerging market currencies, with the 17% rise in Chinese yuan turnover testament to this. More generally, financial markets were operating in a risk-off environment through and beyond October. There were a number of political, economic and geopolitical factors at play in 2018 and early 2019, and these remain important drivers behind currency market sentiment. In the UK, GBP has essentially been a proxy for Brexit sentiment. In addition, the political impasse over the Government shutdown in the US, and fears of a global economic slowdown – led by China – continue to weigh on market sentiment.”

Also commenting on the survey results, Curtis Pfeiffer, chief business officer at Pragma Securities, suggests that the increases in FX spot turnover and options trading in the FXJC report shows that the FX market “remains extremely healthy”, while also pointing out that the concerted effort being made by London to become a hub for yuan trading appears to be bearing fruit.

He adds: “Even though NDF trading decreased from April to October, the absolute value of NDF trading is up significantly on a 12-month basis, from $90 billion to $270 billion. It’s clear the FX market has continued appetite to trade less-liquid currencies.”

Elsewhere, the New York Federal Reserve survey showed that the total average daily FX turnover in the US in October 2018 was $995 billion, up a fractional 0.1% compared to April 2018, but down by the same amount year-on-year.

Spot trading represented $453.4 billion of this total, which is a 2.2% increase compared to the April 2018 survey, and a 10.6% increase compared to the previous year. However, this increase was offset by a 3.5% decline in forwards trading and a 7.6% decline in FX swaps trading in October compared to six months earlier, with each product registering an average daily turnover of $207 billion and $277.8 billion respectively.

FX options trading was up 32.9% year-on-year, and 28% compared to April 2018, but only accounted for $57 billion over the overall FX turnover volume in the US last October.

The survey results from the Tokyo Foreign Exchange Market Committee (TFEMC) showed that total daily FX turnover in Japan was $399.1 billion in October 2018, down 3.8% from the $415 billion reported in April 2018, but up 14% compared to the ADV of $350 reported in October 2017.

Turnover in spot trading increased from $128.4 billion in April of last year to $133.6 billion in October, and FX options turnover rose from $8.7 billion to $9.7 billion over the same period. By contrast, FX swaps trading, representing $203.7 billion of the overall turnover, was down 4.2% in October last year compared to six months earlier, while turnover in forwards and currency swaps declined by 4.6% and 21.4%, respectively.

However, looking year-on-year, the ADV traded of every product type actually increased, except for currency swaps, which at $8.1 billion in October 2017 was 48% higher than the same month last year.

The Reserve Bank of Australia’s semi-annual FX turnover survey showed that the total average daily turnover in all OTC foreign exchange instruments in the Australian market was $114.4 billion in October 2018, down 6.8% compared to six months earlier, but 2.8% higher year-on-year.

Spot, outright forwards and FX swaps accounted for $111 billion of this year’s ADV, and OTC options and cross-currency interest rate swaps in the Australian market accounted for the other $3.4 billion.

Data from the Singapore Foreign Exchange Market Committee (SFEMC) show that average daily reported in overall FX market turnover was $508 billion in October 2018, a 3% decrease from April 2018, but a 5% increase from the previous year.

Spot, outright forwards and FX swaps accounted for $394 billion of this, while OTC options and cross-currency interest rate swaps in the Singapore market accounted for the other $114 billion.

In Canada the local FX committee reports ADV of  $102.1 billion, a fraction higher than April 2018’s $101.8 billion. Spot volume was $18.1 billion, a 13% drop from April, while outright forwards activity also dropped, by 8% to $12.5 billion. FX swaps activity, conversely, rose 5% to $63.5 billion.

Derivatives activity in Canada was also higher, by 16% to $8 billion per day, this was exclusively driven by increased currency swaps activity at $4.6 billion (up from $2.9 billion), while FX options turnover actually declined to $3.4 billion from $4 billion per day.

Data was also released for just the latest committee to start publishing data as Hong Kong’s Treasury Market Association says that daily FX turnover in the centre was $471 billion, down 2.3% from April’s $482 billion, but up 13% from October 2017.

In Hong Kong, spot FX activity was largely unchanged at $91 billion (from $91.3 billion in April), while outright forwards activity declined 8.2% to $44.9 billion ($48.9 billion), FX swaps fell 3.8% to $293.4 billion ($304.9 billion) and FX derivatives activity rose to $41.7 billion from $37 billion in April – a 13% increase. Growth in derivatives activity in Hong Kong was spread between FX options at $23.4 billion ($21.2 billion) and currency swaps at $18.3 billion ($15.8 billion). In all product sets, activity was up year-on-year.

Galen Stops

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