Daily average FX turnover peaked at $5 trillion in September, BIS estimates

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Daily turnover in the FX markets might have peaked at $5 trillion per day in October, according to a quarterly report published by the Bank for International Settlements (BIS), which estimates daily FX activity, at the end of 2011.

Daily turnover is officially only measured every three years in the BIS triennial survey, but the BIS uses its own benchmarking technique, which incorporates data from other sources in the FX markets, such as trading exchanges, semi-annual central bank data and CLS data to assess volume growth. While FX volumes have risen linearly using the longer-term data used in the triennial survey – volumes doubled to $4 trillion a day between the 2004 and 2010 surveys – the trajectory of volumes between the surveys is much more non-linear, states the BIS report. After the 2010 survey, and as the eurozone debt saga began to emerge, the BIS estimates that FX activity might have reached as high as $5 trillion per day in September 2011, before dropping off considerably by the end of the year and into the beginning of 2012. Although the report did not say what it estimates daily turnover to be now, it used time series during previous crises to articulate its findings. For instance, FX activity might have in fact reached $4 trillion per day as early as late 2007, and could have peaked at close to $4.5 trillion during the tumultuous period around the Lehman bankruptcy in September 2008. By April 2009, however, daily average activity is likely to have fallen to around $3 trillion – below the level of the 2007 triennial, before picking up again going into 2010, rising to $4 trillion by the time of the April 2010 survey. “The analysis suggests that global FX activity grew close to linearly between the triennials in 2004 and 2007 but the picture is quite different in subsequent years covering the recent financial crisis,” says Morten Bech, senior economist at the BIS, and author of the report.

 FX market volumes: from semi-annual to monthly estimates
 Source: BIS

The first BIS survey was conducted in April 1989 and has been repeated every three years since. According to the triennial survey, FX activity has grown continuously during the past two decades, with the exception of the 2001 survey after the introduction of the euro in 1999. Reported FX activity increased eightfold from $500 billion in April 1989 to $4 trillion in April 2010.