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SGX FX futures hit record high in Q1

TRADING activity in Singapore Exchange (SGX) currency futures spiked to hit record high in the first quarter, the bourse operator said on Wednesday.

Trading volume at US$290 billion or 5.35 million contracts was a result of market participants managing their portfolio in response to risks stemming from world events such as Sino-US trade talks, according to the SGX monthly newsletter. This represents a 68.2 per cent hike in dollar value and a 47.7 per cent improvement in the number of contracts over the same period in 2018.

SGX USD/CNH futures trading achieved a record US$194 billion in 1Q2019, up 122 per cent year-on-year from US$87 billion. CNH is yuan traded offshore.

Despite the strengthening of the yuan (1.9 per cent in the first quarter), narrow trade ranges as well as reduced volatility, SGX USD/CNH futures were actively traded, and this was a sign of optimism over the outcome of the trade talks. Liquidity improved significantly over the first three months of 2019, with an average daily trading volume of close to US$3.3 billion, compared to about US$2.7 billion during the second half of 2018. Overall, SGX USD/CNH futures trading crossed US$3 billion on 41 days during the first quarter of 2019. The jump in liquidity came on the back of strong market interest outside Asian trading hours. During this period, there were 44 days where volume in overnight trading sessions exceeded US$1 billion. 

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Growing internationalisation of the yuan has led to modest increases in the use of the currency in international trade, according to global payments network Swift. With financial markets poised to include more Chinese equity and bond in global benchmarks, demand for quality assets such as the yuan is set to grow. This means that offshore participants will need to hedge their currency risk in international markets.

SGX INR/USD futures saw a trading volume of US$94 billion or 3.3 million contracts in 1Q2019, and open interest at record high of 78,961 contracts worth US$2.28 billion as at end-March. The increase in open interest indicated that the INR market participants were seeking to manage key event risk in the lead-up to India's general elections.

SGX KRW/USD futures traded at a volume of 96,178 contracts in 1Q2019, more than double the 36,000 contracts in the same period a year ago.