Yen volatility drives record turnover, central bank surveys reveal

Volume was up across forex products in the UK and US in April 2013, with nearly $1 trillion traded daily in the US and more than $2.5 trillion in the UK

The US and the UK saw record turnover in foreign exchange in April, as a yen volatility spike led to a major pickup in investor activity, according to figures published yesterday by the forex committees of the Bank of England and the Federal Reserve Bank of New York.

In the US, average daily turnover shot up from $794 billion in October 2012 to $1.007 trillion in April 2013, according to the New York Fed FX Committee's semi-annual survey. In the UK, the Bank of England's Foreign Exchange Joint Standing Committee (FXJSC) reported that average daily turnover rose from $1.919 trillion in October to $2.547 trillion in April. Turnover in both regions reached a record high since the committees began collecting the survey data in 2004.

In the UK, turnover had jumped significantly in 2011, but declined in 2012 as a result of low volatility and the effects of Hurricane Sandy, which caused a dip in volume in October 2012 - the other month in which survey data is collected. Both the UK and US committees attribute the significant rise in April to the yen, which has fallen steadily since late 2012 and driven a real spike in forex market activity.

"The rise was driven by a substantial increase in USD/JPY activity. Turnover in the pair more than doubled to $503 billion per day, to become the second most traded pair," the FXJSC stated. The New York Fed FX Committee said USD/JPY accounted for roughly 47% of the increase in total average daily volume.

Between October 2012 and April 2013, average daily spot turnover in the UK rose from $730 billion to just over $1 trillion, while turnover in forex swaps rose from $938 billion to $1.063 trillion, turnover in forex options rose from $108 billion to $185 billion, and turnover in outright forwards rose from $166 billion to $205 billion.

In the US, increases were also recorded across products – average daily turnover in spot increased by 37% from $380 billion in October to nearly $519 billion in April; a 21% increase year on year. Forwards were up 20% year on year at $179 billion, while swaps were up 4% at $257 billion and options were up 56% at nearly $52 billion.

In Japan itself, the Tokyo Foreign Exchange Market Committee reported that average daily turnover rose from $300 billion in October 2012 to $348 billion in April 2013. Daily turnover in spot alone jumped by 65% during this period, rising from an average of $90 billion to nearly $150 billion. But turnover in forex swaps dropped by 8.6% from $174 billion to $159 billion, while forex forwards and forex options both saw a modest rise in turnover of 9% and 5%, respectively.

Forex settlement risk mitigation utility CLS revealed yesterday that average daily volume submitted to CLS in April was 29% higher than in October, at 1,277,911 transactions, while the average daily volume submitted was $5 trillion – a 17% rise year on year.

"Of the major currency pairs settled through CLS, spot volumes in USD/JPY and GBP/USD increased the most from October 2012 to April 2013, rising by 134% and 22% respectively," said CLS in a statement.

Forex committees in Australia, Singapore and Canada also published the results of their respective turnover surveys yesterday, with total average daily turnover rising by 5% since October in Singapore (from $361 billion to $381 billion), and by 20% in Canada (from $51 billion to $61.4 billion). In Australia, total average daily turnover rose by just 3% year on year, but dropped by 2% between October and April, from $186 billion to $181 billion.

Visit FX Week for more news on the foreign exchange market.