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Banking

Transparency boosts a growing asset class

Growing investor interest in foreign exchange as an asset class is leading to a rapid expansion of volume and has prompted service providers to offer new products featuring greater speed, transparency and efficiency.

ALREADY THE LARGEST financial market, foreign exchange is growing fast. Results of the Bank for International Settlements' sixth triennial central bank survey of FX and derivatives market activity, published at the end of last month, show a large increase in trading volume in traditional foreign exchange markets.

Average daily global turnover in traditional FX markets rose to $1.9 trillion in April 2004, up by 57% on April 2001 at current exchange rates and by 36% at constant exchange rates (see table). This hefty increase more than reverses the fall in global currency trading volumes between 1998 and 2001 that accompanied the introduction of the euro. 


FX market turnover April daily averages ($bn)
Instrument 1989 1992 1995 1998 2001 2004
Spot transactions 317 394 494 568 387 621
Outright forwards 27 58 97 128 131 208
FX swaps 190 324 546 734 656 944
Estimated gaps in reporting 56 44 53 60 26 107
Total traditional turnover 590 820 1,190 1,490 1,200 1,880
Memorandum item Turnover at April 2004 exchange rates 650 840 1,120 1,590 1,380 1,880
Source: BIS

Following three years of negative to flat equity market returns, investors have been looking for new markets to place their funds in.



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