Between 2007 and 2010 best oakley sunglasses, the global FX market grew by 20 percent, to an average daily turnover of $4 trillion, up from $3.3 trillion 3 years ago at current exchange rates. Not a bad rise, particularly given the upheaval in most economies over the same time period. On the other hand best oakley sunglasses, the growth over the past 3 years pales in comparison to the 72 percent rise that occurred between 2004 and 2007, driven largely by “low levels of financial market volatility and of risk aversion, and expansion in the activity of hedge funds,” the report notes.
While the U.S. dollar is the most prevalent currency in FX transactions, its share of the market continues to drop. It’s involved in 85 percent of transactions, down from 90 percent in 2001. Conversely, the euro and the yen both saw slight gains in their market shares. The euro is part of 40 percent of transactions, while the yen is part of 20 percent. (Because two parties are part of each FX trade, the percentage shares of all currencies totals 200 percent.) The most common transaction pair is between the U.S. dollar and the euro.
What’s more, the growth between 2007 and 2010 was due primarily to the increased activity on the part of financial institutions other than banks, including hedge funds and insurance companies, among others. Activity within this category jumped 42 percent, and surpassed the volume of transactions between reporting dealers, or those that actively participate in local and global foreign exchange and derivatives markets.
Several findings stand out. First, the foreign exchange market grew, although at a more moderate pace than was seen in 2007. Much of the growth was due to higher trading activity of what are referred to as “other” financial institutions, such as hedge and mutual funds. The proportion of cross-border transactions grew from 62 to 65 percent. And, while most FX trades are denominated in U.S. dollars, the dollar’s share of overall FX market continues to slide.
At the same time, the volume of transactions by what are termed “nonfinancial customers,” including corporate and government entities best oakley sunglasses, dropped by 10 percent, from $593 billion in 2007 to $533 billion today. This category accounts for about 13 percent of the overall FX market, down from 18 percent in 2007.
When it comes to the types of FX instruments, foreign exchange spot transactions – that is, the exchange of two currencies at an agreed upon rate for either value or delivery – saw the greatest jump coach factory store, growing 48 percent to $1.5 trillion in the latest survey. Trades of currency swaps, which the BIS defines as a commitment between two parties to exchange streams of interest payments in different currencies for an agreed-upon period of time, grew by 39 percent, although from a much lower base; the current volume of currency swap transactions totals $42 billion. Outright forward transactions, or those involving the exchange of two currencies at an agreed-upon rate for some point in the future, rose by 31 percent to $475 billion.
At this point, hard data showing just how strongly these transactions correlate with the trade of actual goods and services isn’t available from the BIS. However, judging from the numbers, it appears that the FX market reflects this trade — at least to some degree. For instance, the drop in the volume of transactions involving corporate entities corresponds with the tighter economy of the past few years. Similarly, the increase in cross-border FX transactions seems to correlate to the overall trend of growing trade between countries. And coach factory store, the rise in activity of so-called nonfinancial firms mirrors their growing role in many economies. ###
Finally, nearly two-thirds of FX transactions now cross borders. In 1998, only 54 percent did.
Every 3 years since 1989, the Bank for International Settlements has collected and analyzed data from central banks around the globe in order to get a handle on the global foreign exchange and interest rate derivatives markets. 2010’s Triennial Central Bank Survey, the eighth overall, involved 50-plus central banks, reporting for more than 1,300 financial institutions. The survey looked at five categories of instruments: spot transactions, outright forwards, foreign exchange swaps, currency swaps, and currency options.
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