The shrinking forex market

The foreign-exchange market is the biggest in the world – but it is getting smaller, according to the Bank for International Settlements.

The foreign-exchange market is the biggest in the world but it is getting smaller, according to the Bank for International Settlements.

Daily forex trading volumes have shrunk by $300bn in the past three years to $5.1trn, the first decline since the BIS began monitoring the market 16 years ago. Increasingly risk-averse banks have withdrawn from the market amid tighter regulation, notably in the wake of currency-rigging scandals. Hedge funds and speculators have traded less as banks have cut back on their market-making role.

Advertisement - Article continues below

The smaller market will trim revenues in London, which accounts for 37% of global volume. A reduction in liquidity, along with the advent of high-frequency trading platforms, which execute large numbers of orders at high speeds, seem likely to make "flash crashes", such as sterling's recent 6% collapse against the dollar within minutes, more common, reckons the BIS.




The currencies to bet on this year

The US dollar could be set to weaken this year, while the euro, Canadian dollar and the Swiss franc could be good bets for optimistic traders.
17 Jan 2020

Currency Corner: this trend looks very promising for the Canadian dollar

The "loonie" has been on something of a roll against the euro since 2018. Dominic Frisby checks the charts to see where the Canadian dollar is heading…
23 Aug 2019

Bitcoin has just “halved” again – what does that mean, and should you buy in?

Cryptocurrency bitcoin has just hit a milestone, where the rate of new coins being produced halves. Dominic Frisby explains what that means.
13 May 2020

Is bitcoin going mainstream?

The cryptocurrency suffers from all the problems it has always had and that may never change. But digital currencies more broadly may be about to take…
9 May 2020

Most Popular

UK Economy

What bounce back loans can tell us about how we’ll pay for all this

The government will guarantee emergency "bounce back loans" for small businesses hit by Covid-19. Inevitably, many businesses will default. And there'…
1 Jun 2020

This looks like the biggest opportunity in today’s markets

With low interest rates and constant money-printing, most assets have become expensive. But one major asset class hasn’t. John Stepek explains why com…
2 Jun 2020
Global Economy

The MoneyWeek Podcast: James Ferguson on the virus, the lockdown, and what comes next

Merryn talks to MoneyWeek regular James Ferguson of Macrostrategy Partnership about what's happened so far with the virus; whether the lockdown was th…
28 May 2020