Currency trading collapses around the world as swaps and futures fall out of favor

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Global activity in the forex market is declining as traders move away from futures and swap transactions.

Average daily currency turnover in the UK fell to $ 2.6 trillion in October, down 4% from a record $ 2.7 trillion in April, data showed Tuesday by the Bank of England. In North America, daily volume fell 0.1% to $ 995 billion in October from a year earlier, according to a report from the Federal Reserve Bank of New York. Tokyo and Australia also reported lower volumes.

The collapse was led by a drop in futures and swaps, which fell 5.6% and 14.3%, respectively, from a year earlier in US markets. The surprising surge in the dollar last year may have contributed to the disgrace of these instruments, said Olivier Doleires, head of currencies at UBP’s investment management division. For fund managers based outside the United States, a rise in the greenback would boost returns on unhedged dollar-denominated holdings.

“The southward direction of other asset classes, primarily equities, fixed income and credit, may have contributed to the decline in currency swap trading,” said Geneva-based Doleires. “A lot of the flow has gone to dollar assets on an unhedged basis.”

A slight increase in other instruments was not enough to cover the deficit. Transactions in the spot market were up 10.6% from a year earlier, according to the New York Fed, while use of options rose 32.9%.

The most recent data from the Bank for International Settlements, from a triennial survey released in 2016, estimated the daily turnover of the global currency market at $ 5.1 trillion. This level marked a decline from $ 5.4 trillion three years earlier.


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