By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Daily currency volumes in North America rose in April 2021, compared with October 2020 and from a year earlier, according to a semi-annual survey by the New York Federal Reserve’s Foreign Exchange Committee released on Tuesday.
Daily FX volume climbed to $966.7 billion in April 2021, up 3.6% from the October 2020 survey period, and 26.4% stronger when compared with the prior year.
Trading on London’s foreign exchange market reached a record high in April of $3 trillion in average daily turnover, the Bank of England said on Tuesday, with significant rises in dollar, sterling, Japanese yen and commodity-linked currency volumes.
Volatility in FX markets has fallen since a COVID-19-triggered rout in 2020, but with trading volumes across record-high stock markets continuing to surge into 2021, demand for buying and selling currencies has only grown.
“Despite volatility being much reduced, the global economy is in a much better state now than a year prior,” said Michael Brown, senior analyst at payments firm Caxton in London.
“This necessitates more cross-border trade, more M&A, more payments etc – all things that would be associated with a recovering economy and all generating more FX flows,” said Brown.
Year-over-year trading volume growth looks especially strong given the April 2020 period was near the peak of the coronavirus-induced panic when liquidity shrank across most markets and traders grappled with global central bank intervention that pushed interest rates to zero.
Trading volume in April 2021 is likely to have benefited from investors positioning for normalization of monetary policy, Brown said.
For North America, year-over-year, average daily volumes increased in spot, forward, swap and Over-The-Counter (OTC) option transactions, while only spot and swap transactions logged an increase compared with the October 2020 period, the survey showed.
Compared with the October 2020 survey period, the largest increases in volume across all instruments by currency pair occurred in euro-U.S. dollar and U.S dollar-Canadian dollar pairs.
(Reporting by Saqib Iqbal Ahmed in New York; Editing by Franklin Paul and Matthew Lewis)
