ALREADY THE LARGEST financial market, foreign exchange is growing fast. Results of the Bank for International Settlements' sixth triennial central bank survey of FX and derivatives market activity, published at the end of last month, show a large increase in trading volume in traditional foreign exchange markets.
Average daily global turnover in traditional FX markets rose to $1.9 trillion in April 2004, up by 57% on April 2001 at current exchange rates and by 36% at constant exchange rates (see table). This hefty increase more than reverses the fall in global currency trading volumes between 1998 and 2001 that accompanied the introduction of the euro.
| FX market turnover April daily averages ($bn) | ||||||
| Instrument | 1989 | 1992 | 1995 | 1998 | 2001 | 2004 |
| Spot transactions | 317 | 394 | 494 | 568 | 387 | 621 |
| Outright forwards | 27 | 58 | 97 | 128 | 131 | 208 |
| FX swaps | 190 | 324 | 546 | 734 | 656 | 944 |
| Estimated gaps in reporting | 56 | 44 | 53 | 60 | 26 | 107 |
| Total traditional turnover | 590 | 820 | 1,190 | 1,490 | 1,200 | 1,880 |
| Memorandum item Turnover at April 2004 exchange rates | 650 | 840 | 1,120 | 1,590 | 1,380 | 1,880 |
| Source: BIS | ||||||
Following three years of negative to flat equity market returns, investors have been looking for new markets to place their funds in.