London FX trading volumes hit record, North America rises in April

LONDON (Reuters) - Daily trading volumes in the world’s biggest foreign exchange trading center, London, surged to a record in April as trading currency swaps and the British pound picked up, a semi-annual survey by the Bank of England showed on Tuesday.

Currency turnovers in North America, another major hub, posted strong gains from year-ago levels on broad growth across different foreign exchange instruments, according to New York Federal Reserve semiannual survey data also released on Tuesday.

“I think the data show that the secular trend of rising FX volumes comes into play again. It was interrupted after the (global financial crisis) and some regulatory measures that dampened spec FX activities, but it is not broken,” said Ulrich Leuchtmann, head of FX and emerging market research at Commerzbank AG in Frankfurt.

Traders’ perception of possibly less easy monetary policies from the European Central Bank and the Bank of Japan, while the Federal Reserve sticks to its gradual rate-hike path, spurred changes in their positions in the dollar, euro and the yen, analysts said.

Average daily forex turnover in London stood at $2.73 trillion in April, up 15 percent from six months ago, with swaps trading up 18 percent in that period versus an 8 percent rise in cash trading volumes.

Across the Atlantic, daily currency volumes averaged $993.55 billion in April, up 11.7 percent from a year ago, the New York Fed said.

London's turnover in the British pound GBP=D3 rose to a record $351 billion, up 18 percent from October 2017 and nearly doubling from last year, as disappointment over the central bank not raising interest rates prompted traders to dump the pound against the dollar.

The British currency GBP=D3 rose to a post-Brexit referendum-vote high at $1.4377 in mid-April and fell nearly five percent until the end of the month, after Bank of England Governor Mark Carney signaled the central bank may not raise interest rates in May due to "mixed" economic data.

“April was a particularly bad month for sterling traders as Carney poured cold water on expectations of a rate hike by the market,” said Michael Hewson, chief market analyst at CMC Markets in London.

Daily turnover in the euro-dollar exchange rate jumped by 11 percent to $778 billion per day -- the most-traded currency pair -- for a market share of 29 percent of the total traded volumes. Chinese yuan trade almost doubled from a year ago, the report said.

In terms of market share, foreign exchange swaps comprised nearly half of total turnover in London, followed by cash trading and currency forwards.

Additional reporting by Tom Finn in LONDON,; Richard Leong in NEW YORK; Editing by Larry King and Bernadette Baum