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UK FX Turnover Hit by Swaps Decline

The Bank of England’s Joint Standing Committee has released the results of its semi-annual survey of FX turnover, which indicate that the credit crunch, as expected, hit overall turnover.

The survey shows an 8% drop on the previous survey in April 2008, almost entirely due to a decline in FX swaps and currency swap turnover as credit lines were tightened and banks stopped lending to each other in the wake of the Lehman Brothers’ collapse. That said, the data does record a very healthy 21% year-on-year increase from October 2007, and at $1.679 billion per day, it remains the biggest FX centre in the world by quite some way.

An indication of the troubles surrounding the survey can be found in the bland statement from the JSC that “one less institution took part in the October survey” – that institution of course being Lehman.

Spot turnover was higher in April in London, as was outright forward turnover, which suggests that the credit wheels did not entirely seize up for clients especially. A indication of the credit crunch can be found in the fact that the gap between spot and FX sewap turnover has narrowed significantly. The latter, traditionally the busiest market in London, dropped from $930 billion per day in April to $719 billion per day in October, while spot rose from $567 billion per day to $605 billion.

Singapore and Australia are due to report their findings later today.

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