FX Turnover Soars in April
Posted by Colin Lambert. Last updated: August 1, 2022
The latest regional FX committee turnover surveys indicate that, perhaps not unexpectedly, that the sustained volatility in FX markets has resulted in a significant rise in activity. The surge in volume, by some 10.8% year-on-year, was driven exclusively from the UK and Asian reports, however, with both the US and Canada seeing a decline in activity compared to April 2021.
The latest survey, in April, coincided with the latest Bank for International Settlements (BIS) Triennial Survey of Global FX Turnover, the benchmark number for the size of the FX market, which is expected to be released in September. Although some local FX committees collate data in a different fashion to the BIS, the six reports in April 2022 (Hong Kong does not report on BIS cycles), collectively comprise a 21.2% increase on April 2019, the last BIS survey. If this growth is reflected in the BIS survey, the global FX market will be very close to $8 trillion per day in notional turnover terms.
The UK reinforced its position as the largest FX market, breaching the $3 trillion mark for the first time since surveys began in 2005. Overall turnover was $3.271 trillion in April in the UK, with growth across all product sets. Spot FX turnover was $884.2 billion per day, a 9.5% increase from April 2021, while FX swaps activity – easily the biggest product set – rose by 7% year-on-year to $1.686 trillion per day. NDF average daily volume (ADV) was $135.6 billion, a 9.1% increase from April 2021.
There were healthier gains in outright forwards in the UK with ADV hitting $368.8 billion, a 14.3% increase from the previous April, as well as in FX options. The latter has ended several years of declining volumes, thanks to low volatility generally, by bouncing spectacularly to $170.4 billion per day – a massive 33.3% increase year-on-year.
Singapore’s Inexorable Rise Continues
Perhaps the most interesting dynamic in the local surveys is the divergence in volumes between the US and Singapore, with the latter continuing to rise very strongly, while the former drifts sideways. The US remains the second biggest centre on the planet with ADV of $956.8 billion, but Singapore’s latest leap brings it closer than ever at $908.7 billion. Year-on-year, US turnover declined by 1.1%, while Singapore leapt by an incredible 42.1%.
Spot turnover in Singapore nearly doubled year-on-year, rising to $241.4 billion, an 81.3% increase. The Singapore report does not break out execution styles, but it is reasonable to assume that the growth is related to that of FX market participants locating in the relatively new SG1 data centre.
While spot was the biggest contributor to the city state’s growth, other products also saw good increases, with outrights rising by 57.8% to $141.5 billion; FX swaps by 44.3% to $454.3 billion; and FX options by more than 120% to $65 billion.
One intriguing factor in the Singapore report is what has happened to currency swaps activity? In April 2021, turnover in this product was $73.4 billion, in April 2022 it was just $6.6 billion. Over the previous five years’ worth of surveys, Singapore has averaged around $62 billion per day in currency swaps, which suggests that if it returned to that longer term average it would surpass the US as the world’s second busiest centre.
In the US report, the decline was largely driven by FX swaps, because spot ADV was $392.4 billion, up 2% year-on-year, while outright forwards ADV was $198.7 billion, up 8.3%. Within this, NDF activity was $50.3 billion, up 3.5%. Elsewhere, FX options activity, like elsewhere was up healthily, by 28% to $53.4 billion. In FX swaps, by contrast, ADV was $312.2 billion, a 12.6% decline year-on-year.
Japan, Australia Higher, Canada Declines
Elsewhere, turnover in Japan was also higher year-on-year, by 6.8% to $478.5 billion – as is the case in Singapore and the UK this is the highest recorded since the surveys began – with spot turnover the main driver, probably the result of the sustained rally in USD/JPY. Spot ADV was $164.3 billion, up 18.3% year-on-year, while outright forwards turnover was $65.4 billion, a 3.3 increase. Again, FX options activity surged, by 75.3% to $12.8 billion, however there was a small decline in FX swaps, by 1.3% to $231.3 billion.
Although there has been a divergence in activity between Australia and Canada in recent years, with the latter finally overtaking the former for the first time in April 2021, the positions are reversed in the latest surveys with the Australian FX Committee survey reporting ADV of $150.4 billion, up 7.9% year-on-year.
The only product to see a decline in Australia was spot FX, with turnover of $34.3 billion, down 6.9% year-on-year. Elsewhere, however, it was better news, with outright forwards rising 29.4% to $24.9 billion, while FX swaps turnover was $86.3 billion – an 8.4% increase year-on-year. FX options activity rose by 47.3% to $1.8 billion.
Finally, in Canada, ADV was $147 billion per day, with spot activity rising 45.2% to $20.6 billion; outrights up 18.1% to $16.3 billion; and FX options rising from $4.1 billion to $4.4 billion in the latest survey. As was the case with the US report, FX swaps were the source of the decline in Canada, dropping by 11% to $105.7 billion.
Attention now turns to the global BIS survey, due in September, at which time the FX market will have its latest benchmark of activity for the next three years. If the regional reports are anything to go by, it will be a very positive report for the FX industry as a whole.