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Central bank surveys show FX volumes hit record highs

[LONDON] A surge in currency market volatility in the middle of last year pushed average daily volumes of trading to new records in the six months to October, regular surveys by a handful of major central banks showed on Tuesday.

Daily trading in London, the world's main foreign exchange centre, rose by 11 per cent in the period to a record US$2.67 trillion a day, the Bank of England's survey showed, including a 40 per cent jump in daily spot volumes to US$1.1 trillion.

"This is the highest level of turnover recorded since survey inception," the BoE said.

Numbers from the equivalent committee run by the New York Federal Reserve showed volumes rising by a third compared to the previous survey last April, hitting a record US$1.095 trillion per day. Spot volumes 62 per cent in North America.

Monthly data from other sources in the foreign exchange market show that growing differentiation between monetary policy in the United States and other major economies, combined with widespread political risk, has helped to solidify a recovery in trading over the past few months.

Overall trading volumes topped US$10 trillion a day during the collapse of the Russian rouble in December and were also driven above US$9 trillion by turmoil around the Swiss franc two weeks ago.

That is almost twice the roughly US$5 trillion a day averaged in recent years, according to the most recent global survey by the Bank of International Settlements, which correlates numbers from all the central banks once every three years.

One key driver of volumes going forward is expected to be the growing internationalisation of China's yuan, or renminbi currency.

The breakdown of the London numbers showed spot yuan numbers still lagging behind a handful of other big emerging market currencies, including the Mexican peso and Turkish lira, although on other instruments it was greater.

A third report from the Tokyo Foreign Exchange Market Committee showed spot foreign exchange turnover in Asia rose by more than 40 per cent to US$1.53 trillion a day over the same period.

It also showed that the yuan clocked US$8.3 billion a day in spot transactions, the highest among Asian emerging market currencies, which included the Hong Kong dollar, the Singapore dollar, Taiwanese dollar and Korean won among others.