NEW YORK/LONDON Feb 6 Foreign exchange turnover slipped in much of the world in late 2011, a move analysts attributed to intervention by central banks damping speculation even as hopes for a stronger U.S. economy drove volume up in North America.
A semiannual survey released by major central banks on Monday showed average daily turnover in foreign exchange markets fell in the UK, Singapore, Canada and Australia in October from April of last year.
"The main reason why I think we've seen this pullback is intervention," said Kathy Lien, director of currency research at GFT Forex in Jersey City, New Jersey.
With traders on the alert for action, primarily from the Swiss National Bank and the Bank of Japan, trading in those currencies became less attractive, Lien said.
The SNB capped the franc at 1.20 per euro on Sept. 6 to stave off a recession after investors spooked by the euro zone debt crisis drove the safe-haven 'Swissie' sharply higher in just a few months.
In late October, Japan intervened unilaterally in the foreign exchange market to brake gains in the yen.
In contrast, North American volumes hit a record high, driven by a 28 percent increase in spot trading compared with April, according to the New York Federal Reserve-sponsored Foreign Exchange Committee.
Of the $977 billion average daily turnover in October, across currency pairs and instruments, turnover in the euro versus the U.S. dollar accounted for the biggest single share of activity at 37 percent, or $361 billion, a survey high.
The rise in October volume coincided with rallies in riskier U.S. assets, with stock indexes rising partly on data suggesting the recovery in the world's biggest economy was gaining steam.
"Americans toward the fourth quarter were feeling a little more optimistic," Lien said. "Their willingness to take on risk was higher than speculators in other countries."
A Bank of England survey showed that average daily turnover of spot, outright forwards, non-deliverable forwards, swaps, FX options and currency swaps in the UK market totaled $1.972 trillion in October 2011, 3 percent lower than in April 2011 but 17 percent higher than a year earlier.
While the drop from April 2011 was driven by a 9 percent fall in FX swaps activity, spot turnover rose 2 percent to a record high of $802 billion.
Turnover for currency swaps also registered a relatively large increase, although average daily turnover in forex options fell to $130 billion from $140 billion in April 2011.
The daily turnover in FX swaps fell to $820 billion in the latest survey, from $902 billion.
According to the survey, the U.S. dollar was the most actively traded currency, and its share rose in the six months to October. The euro was the next most-traded currency.
The Australian dollar's share rose at the expense of the pound sterling, the Japanese yen and the Swiss franc.
Thirty financial institutions active in the UK foreign exchange market participated in the survey.
A separate survey from the Singapore Foreign Exchange Market Committee showed average daily reported "traditional" foreign exchange turnover was US$308bn, a 1.1 percent decrease compared with April 2011.
Data released from the Reserve Bank of Australia showed total average daily turnover in all over-the-counter foreign exchange instruments in the Australian market was US$167.9 billion in October 2011, a drop of 23 percent from April 2011 and a fall of 14 percent from a year earlier.
In Canada, the average daily turnover of spot transactions, outright forwards and foreign exchange swaps fell to US$52.4 billion in October from $61.2 billion in April 2011, the first such fall in traditional foreign exchange turnover since April 2009.
The average daily turnover of foreign exchange derivatives totaled US$3.3 billion, down 15.4 percent from six months earlier.