Foreign Exchange Trading Soars to $6.6 Trillion a Day, US Dollar is Total King
Foreign Exchange Trading Soars to $6.6 Trillion a Day, US Dollar is Total King by Wolf Richter for Wolf Street
Ginormous numbers, FX swaps and spot trades, USD, EUR, JPY, GBP, Australian & Canadian dollars… but where the heck is China’s CNY?
It happens every three years: The Bank for International Settlements released its Triennial Central Bank Survey about the global foreign exchange (FX) and over-the-counter (OTC) derivatives markets, as it occurred in April. The numbers are ginormous, and get more ginormous with every survey, with trading volume measured in trillions of dollars per day. This is a huge data trove, and I will focus here on global FX trading.
To start with, there are the amounts. Currencies are traded in pairs, such as the US dollar against the euro. In April 2019, trading in FX markets reached $6.59 trillion per day, up 30% from the prior survey period, April 2016. Trades with the USD on one side of the trade averaged $5.82 trillion per day in April 2019. This was up 31% from the daily average in April 2016 and was over five times the daily average in April 2001:
The sudden appearance of the euro in 2001 as the second largest currency out of nowhere indicates that at that time, it had just replaced five currencies, including the biggie, the Deutsche Mark.
The chart above shows the top 16 most traded currencies. Four have a significant share – USD, EUR, Japanese yen (JPY), and British Pound (GBP). The remaining 12 of the top 16 currencies are the limp spaghetti at the bottom of the chart, including the Chinese renminbi (CNY).
In terms of the share that a currency is on one side of a trade, the US dollar remains total King, at 88.3%. Its share has remained relatively stable over the years, despite three factors:
One, the arrival of the euro, whose share, after a brief surge to 38% between 2001 and 2010, got whacked by the euro debt crisis in 2010-2012, and fell to a series low of 31.4% in 2016. But in 2019, its share ticked up to 32.3%. This slight increase in share was due to higher than market-average growth in trading of the EUR/JPY and the EUR/CHF currency pairs.
Two, the surge of emerging market currencies, including the CNY, from near zero in 2001 to 21% in 2016, and to 24.5% in 2019.