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Foreign Exchange

Foreign exchange debate: Banks and buyside face up to market pressures

Foreign exchange traders are getting used to huge volatility in their two core markets – the euro and the dollar. But they’re still battling regulators to prevent what they consider would be a damaging move to trading on exchanges.

Foreign exchange debate: Learn more about the panelists
Euromoney FX debate videos

James Kwock (JK) joined Amundi London as head of currency management in October 2010

EXECUTIVE SUMMARY

• US quantitative easing is fundamental to the FX market, driving the dollar down and other currencies up

• The difficulties faced by the EU in dealing with eurozone countries’ problems are intractable and FX market participants are concerned about this

• The central banks of most countries have limited ability to intervene successfully in the FX markets

• Regulators’ attempts to pull all trading on to exchanges are misguided when it comes to FX markets and there are limited opportunities to educate them on this

• Regulatory pressure for transparency is not necessarily a good thing: transparency does not necessarily breed market stability

JK, Amundi The most important thing in the economic background to the foreign exchange market is that the Federal Reserve has started quantitative easing. It’s a very important signal because there’s not much that the bond market can continue to do to help in easing monetary conditions in the domestic US economy.

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