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London FX turnover hits new high as commodity currency trading soars

London FX turnover hits new high as commodity currency trading soars
London FX turnover hits new high as commodity currency trading soars   -   Copyright  Thomson Reuters 2021
By Reuters

LONDON – Trading on London’s foreign exchange market reached a record high in April of $3 trillion in average daily turnover, the Bank of England said on Tuesday, with significant rises in dollar, sterling, Japanese yen and commodity-linked currency volumes.

In its semi-annual survey of turnover in the world’s largest foreign exchange centre, the bank said average daily reported UK FX volumes rose 24% versus April 2020 levels. This was thanks to sharp rises in trading of swaps, spot and forward products.

Volatility in FX markets has fallen since a COVID-19-triggered rout in 2020, but with trading volumes across record-high stock markets continuing to surge into 2021, demand for buying and selling currencies has been growing too.

As well as double-digit percentage rises in the top traded currency pairs – euro/dollar, sterling/dollar and dollar/yen – a huge rally in commodity prices in the past year, as investors bet on a strong global economic rebound, has fuelled big increases in Canadian and Australian dollar trading.

Turnover in the Canadian currency versus the U.S. dollar jumped 46% from April 2020 levels to a daily average of $136.7 billion, while trading in the Aussie rose 30% to $121.3 billion, the Bank of England said, making them the fourth and fifth most traded currency pairs respectively.

Several emerging market currencies such as the Indian rupee also saw large increases.

The Swiss franc was one of the few to see a dip in turnover, with trading versus the dollar down slightly on last year.

Chinese yuan activity was up significantly on last April but has fallen since the October survey.