The characteristics of the Forex markets

Currencies are traded in many international financial centers. According to the Bank for International Settlements (BIS), the daily turnover in the forex markets in September 2019 touched the record of 6.6 trillion dollars. The City of London represents the largest world forex market, with a daily volume share of 43.0%, an increase compared to 37.0% of the previous BIS surveys (2016); New York has a 17.0% share, down from the previous 20.0%, while in Asia the dominant financial centre is Hong Kong.

As for the single currencies, the dollar is the world’s most traded currency, on one side of 88.0% of all trades. For this reason, the dollar is sometimes labelled as a ‘veichle currency’, as it is used in order to denominate international trades whose parts do not reside in the country which issues the veichle currency. The euro’s share has increased from 2016, rising to 33.0% from 31.0%. It was equal to 39.0% in the same month a decade ago. By contrast, the Japanese yen’s share fell -5.0% to 17.0%, although it is still the third most actively traded currency (on one side of 17.0% of all trades).

Emerging markets currencies and China’s renminbi also saw their market shares advance, to 25.0% and 4.3% respectively. With 284 billion dollars in turnover, the Chinese offshore currency remained the eighth most traded currency, ranking just after the Swiss franc.

The BIS also shows the market for over-the-counter (OTC) interest rate derivatives more than doubled to 6.5 trillion dollars from 2.7 trillion in 2016, driven mainly by increased hedging and positioning amid shifting prospects for growth and monetary policy.

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