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Trading in emerging market currencies outpaces major peers


CURRENCY trading grew at a faster pace in emerging markets than developed nations over the past three years, boosted by an increase in automated buying and selling as well as demand for riskier assets, according to the Bank for International Settlements.

Developing nation currencies accounted for 23 per cent of trading in the global foreign exchange market in April, up from 19 per cent in 2016 and 15 per cent in 2013, the Basel, Switzerland-based institution said in its quarterly review. The currencies' average daily turnover jumped about 60 per cent between April 2016 and April 2019 to almost US$1.6 trillion, according to the BIS, which fosters cooperation between central banks.

In early 2016, emerging market currencies started a two-year rally that took MSCI Inc's gauge to the highest level on record as investors rushed into higher-yielding assets. Concern over the impact of a trade war between the US and China has since dented some of those gains.

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Electronic activity also boosted the market for non-deliverable forwards, the BIS said. NDFs are often used by investors to bet on the direction of a currency and are typically traded in offshore financial centres. Despite continued restrictions on their convertibility, NDF trading in the Indian rupee, Indonesian rupiah and Philippine peso more than doubled, the BIS said. BLOOMBERG