Global Currency Trading Falls Amid Volatility Drop, Market Probe

By John Detrixhe and Neal Armstrong  

Foreign-exchange volumes in the U.S., U.K. and Australia fell in April from a year earlier, according to reports from the world’s biggest central banks, amid subdued price swings and a probe into trading activity.
Average daily currency turnover in North America was $811.1 billion, a 20 percent drop from a record $1 trillion in April 2013 and a 0.6 percent decline from October, the Federal Reserve-sponsored Foreign Exchange Committee said in a statement on its website, citing a twice-yearly survey. In the U.K., April’s $2.4 trillion in turnover was 6 percent below the record high of $2.6 trillion a year earlier, the Bank of England’s Foreign Exchange Joint Standing Committee said. Daily U.K. trading rose 7 percent from October.
Implied volatility in foreign-exchange markets slumped to a record this month amid muted price swings as policy makers provided unprecedented amounts of cheap cash to spur growth.
Deutsche Bank AG’s Currency Volatility Index, based on three-month options for nine major currency pairs, fell to a record 4.93 percent on July 21.

Danske Bank A/S Chief Executive Officer Thomas Borgen signaled last week he’ll cut jobs in currencies and fixed-income trading unless investors return. The Copenhagen-based company’s revenue from market making plunged 77 percent in the second quarter from a year earlier, dragging down net trading income.
Credit Suisse Group AG is cutting expenses at its foreign-exchange and rates businesses by shifting more of those trades to its electronic platform, Chief Financial Officer David Mathers said July 22 on a conference call.

Scrutinizing Allegations

Regulators and prosecutors are scrutinizing allegations that dealers at the world’s biggest banks traded ahead of their clients and colluded to rig the WM/Reuters rate, a benchmark that pension funds and money managers use to determine what they pay for foreign currencies. More than 25 traders have been fired, suspended or put on leave after the allegations emerged last year.
The probe may have cut volumes, according to minutes from the BOE’s Joint Standing Committee March 18 meeting, released last month.
Turnover in average daily trading in Australia was $167.8 billion in April, a decline of 8 percent from a year earlier and little changed versus October, according to the Reserve Bank of Australia.

Japan, Singapore

Japan’s average daily volume declined 2.6 percent to $362.9 billion in April, from $372.7 billion in October, the Foreign Exchange Market Committee said. In Singapore, turnover increased 3 percent in April from six months earlier, to $291 billion, the Singapore Foreign Exchange Market Committee said.
Canada’s Foreign Exchange Committee said average daily turnover increased 11.3 percent to $58.2 billion in April, from $52.3 billion in October.
The reports are based on surveys of financial institutions that participate in the currency markets. The committees collaborate with each other and release their surveys at the same time, according to the U.S. group, which was formed in 1978 and is sponsored by the Fed Bank of New York.