Foreign Exchange volumes increase in January 2018
Volumes of Forex trading have increased since the start of 2018, mainly due to investor speculation about a weaker dollar. The volatility of foreign exchange had calmed in recent years as record liquidity levels from central banks flooded markets and left investors with fewer ways to make profits from trading currencies.
Fall In USD
The continued depreciation of the dollar, alongside the US Treasury announcement it welcomed the weaker dollar, have fuelled more activity in currency markets. This has been coupled with central banks limiting stimulus to the markets. The electronic trading platforms are reporting increased activity in fixed income trading volumes as well.
CLS, a leading Forex settlement service, reported that daily traded volumes through January 2018 were up by 24% on the previous year, to $1,805tn. This was also up 15.6% on the December 2017 volumes.
CLS commented that this year they had seen “a much more substantial increase as FX volatility has risen“. Their CEO, David Puth, added that they had noticed a broad trend of year-on-year increases in the last six months of 2017, but that the market had really taken off in January 2018.
Early February saw even more volatility and accelerated trading with an increase on January’s figures of a further 14% reported for the period of 5 February to 8 February alone.
EURUSD Live Price Chart
Thomson Reuters commented that Forex trading on their platform had increased to record highs in January 2018 which they attributed to the effects of the implementation of the EU’s Market in Financial Instruments Directive II (MiFID II). The company reported average daily volumes over $432bn in January, compared to normal daily averages of just over $407bn.
The new MiFID II legislation was designed to increase transparency in markets and has contributed to increased volumes of electronic fixed income trading. MarketAxess is one of the biggest platforms and they have reported increased volumes to $7.3bn daily in January, which is up 22% on the previous year’s figures.
It has to be said that volatility in the euro/dollar currency pair does still remain below long-term averages at this time. The dollar/euro currency pairing is the most frequently traded currency pair.
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