Currency trading volumes hit record highs in first quarter

LONDON (Reuters) - Foreign exchange trading volumes rose to a record high in the first three months of the year, data showed on Thursday, as a rise in volatility from multi-year lows encouraged more buying and selling of currencies.

FILE PHOTO: U.S. dollar and Euro bank notes are photographed in Frankfurt, Germany, in this illustration picture taken May 7, 2017. REUTERS/Kai Pfaffenbach/Illustration/File Photo

The numbers released by CLS, a major settler of trades in the foreign exchange market, follows a huge surge in trading on Thomson Reuters’ trading platforms, with its March volumes up 28 percent on last year and narrowly below February’s, its best ever month.

The rise in FX volumes will be welcomed by trading platforms and banks that have struggled with calm financial markets squeezing their profits in recent years.

Wall Street banks Goldman Sachs and Morgan Stanley this week reported a jump in first-quarter profits thanks to a surge in trading activity, although Morgan Stanley executives warned results through the rest of the year may not be quite as strong.

After volatility spiked during a sudden sell-off across financial markets in January and February, price swings have returned to lower levels, with price moves in the biggest currencies notably small.

Market participants say April has been a quiet month so far, with currencies mostly shrugging off rising geopolitical tensions, concerns about a possible U.S.-China trade war and the prospect a global economic growth boom is nearing its peak. Key currency pairs remain stuck in narrow price ranges.

“FX markets are in a wait-and-see mode,” Thu Lan, an FX analyst at Commerzbank in Frankfurt said. “Everyone is waiting to see the first (monetary policy) normalization steps from central banks.”

Trading of emerging market FX, particularly the Russian rouble after the announcement of new U.S. sanctions targeting Russian companies and oligarchs, may have held up better in April but these currencies are traded in far lower volumes than the ‘G10’ currencies like the U.S. dollar, euro and Japanese yen.

(For a graphic on 'Currency volatility index' click

CLS said in a statement that the average daily traded FX volumes submitted to it reached $1.87 trillion between January and March, surpassing a previous high of $1.67 trillion in the first quarter of 2013.

Daily volumes in March reached $1.855 trillion, down 4.8 percent on February but up on a year earlier.

As well as volatility, CLS attributed the rise in volumes to a trend of more buy-side firms like asset managers using its services.

Average daily volumes of spot and derivatives currency trading touched $461 billion in March, slightly lower than the record month of February when volumes hit $463 billion, Thomson Reuters said.

NEX Group, which owns another big FX trading platform, saw average daily foreign exchange spot trading volumes rise 7 percent to $92.7 billion in March from the previous year. Trading of fixed income products rose even more.

Reporting by Tommy Wilkes; Editing by Toby Chopra