STANLIB > Economic Focus > World Currency Market

World Currency Market

The Bank for International Settlements recently released their triennial report on global foreign exchange market activity in 2010. There are a few points from the report that are worth mentioning:

  • The turnover in the global foreign exchange market has increased by 20% from 2007 to 2010. Average daily turnover reached almost $4.0 trillion in 2010 compared with $3.3 trillion in 2007. The increase was driven mainly by a 48% growth in turnover of spot transactions, which represent 37% of foreign exchange market turnover. Foreign exchange market transactions with non-financial customers declined by 10% in 2010, dropping to $533 billion from $593 billion in 2007. This category, which includes corporations and governments, now represents only around 13% of global foreign exchange market activity, its lowest share since 2001.

  • The geographical distribution of foreign exchange trading typically changes very slowly over time, and the 2010 results are no exception. Banks located in the United Kingdom accounted for 37% of global foreign exchange market turnover, followed by those in the United States (18%), Japan (6%), Singapore (5%), Switzerland (5%), Hong Kong (5%) and Australia (4%). Japan has recovered its third-place ranking which it lost in the 2007 survey. Singapore has moved ahead of Switzerland in 2010. In dollar terms, the greatest increases in trading activity were in the United Kingdom ($370 billion), the United States ($159 billion), Japan ($62 billion) and Hong Kong ($57 billion). Other countries that saw significant growth relative to the 2007 survey include Denmark, France, Singapore, Finland, Turkey, Australia and Spain.

  • The currency composition of foreign exchange turnover has also changed only slightly over the past three years. The market share of the top three currencies (the US Dollar, Euro and Japanese Yen) increased by 3%, with the market share of the top 10 increasing by only 1.4%. The biggest increases were seen for the Euro and Yen, and the biggest decline for Sterling. Together, the Dollar, Euro, Yen and Pound, account for almost 80% of all foreign exchange transactions worldwide. The most significant increases in emerging market currencies were seen for the Turkish Lira, Chinese Renminbi and Korean Won, followed by the Brazilian Real and Singapore Dollar. The Renminbi now accounts for almost 1% of global turnover, on a par with the Indian Rupee and the Russian Rouble. The SA Rand has slipped to being the 20th most traded currency in the world during 2010, down from 15th in 2007.

  • Although the US dollar continued the slow retreat from its 90% peak share of all transactions reached in the 2001 survey, just after the introduction of the euro, it remains the dominantly traded currency world-wide. The share of foreign exchange transactions involving the US dollar has fallen over time, to 85% in 2010. This decline benefited the Euro, which gained 2% in market share since the last survey and accounted for 39% of all transactions. The Japanese Yen also increased its market share by 2%, to 19%; a recovery relative to the 2007 survey but still below its 2001 peak of 24%.

Download the presentation slides