FX Market is Slowing! Forex Trading Volume Shrinks

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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