The handling of the European debt crisis, continued low-interest rates worldwide, and even the disruption of Superstorm Sandy in the U.S., drove down daily volume on the largest foreign currency exchange centers in the Western world in 2012, while activity in the Asia-Pacific region seemed unaffected.
The mixed results—which showed drops in the United States, the United Kingdom and Canada, but gains in Japan, Singapore and Australia—were taken from several biannual surveys from major central banks across the world that were released on Tuesday.
Globally, average daily trading volumes in the most common foreign exchange transactions—spot, swaps and forwards—were down 7% in October 2012 compared to a year earlier, according to CLS Bank, the world’s largest foreign exchange settlement system.
CLS data, which only includes foreign exchange transactions done through its platform, showed that global volume actually rose 4% between April and October 2012, due likely from the strength of Asia-Pacific activity.
In North America, total volume for foreign exchange transactions was $794 billion in October 2012, a drop of 7.7% compared to $860 billion in April 2012, according to the Foreign Exchange Committee (FXC) of the New York Federal Reserve. The October volume also represented an 18.8% lower level than the volume in October 2011.
The FXC biannual survey measures daily volume in foreign currency exchange transaction each April and October. The data is reported from 25 North American financial institutions.
Among transaction types in North America, spot transactions posted the sharpest decline, falling precipitously 32.7% to $381 billion compared to a year earlier. Only forward transactions showed an increase, rising 6.1% to $144 billion in October 2012.
The contagion in the Western Hemisphere was evident in the dramatic drop in volume of transactions involving the euro versus the U.S. dollar, the FXC reported. Declines in deals on euro/dollar represented about two-thirds of the overall decrease in daily transactions.
Indeed, much of the reason for the volume struggles in foreign currency exchange deals was the trouble the euro has endured for much of last year. As the European Central Bank tried to enact measures to combat the region’s debt crisis throughout last year, the euro languished in very narrow trading ranges, lowering volatility and squeezing profit margins, according to a variety of reports.
In the U.K.—the world’s largest foreign currency exchange market—volume also fell in October 2012, dropping 5% to $1.91 trillion, compared to $2.01 trillion in April 2012, according to the Bank of England (BoE) survey of 30 U.K. financial institutions.
The October 2012 level was down 7% from a year earlier, and marked the lowest volume level since October 2010, BoE reported.
Among transaction types, spot foreign exchange activity fell to $678 billion per day in October 2012, down 6% from $719 billion in April 2012.
In the Asia-Pacific region, the numbers told quite a different story.
In Japan, daily foreign exchange volume climbed 6.3% to $301 billion in October 2012, compared to $283 billion in April 2012, based on a survey of 19 major Japanese banks.
In Singapore, average daily volume grew 5% in October 2012 to $54 billion, compared with $51 billion in April 2012, according to data from the top 30 financial institutions in that country.
In Australia, the average daily volume was $186 billion in October 2012, up 6% from April 2012 and 12% higher than October 2011, according to data from 25 Australian financial institutions.
