The volumes on the foreign exchange market boosted by the volatility

LONDON (Reuters) – trading volumes on the foreign exchange market have increased sharply since the beginning of this year, show figures released on Thursday, a progression encouraged by a resurgence of volatility on the background of the weakness of the dollar and uncertainty about the evolution of monetary policy.

The volatility of the currencies had fallen in recent years, stifled by the amounts record of liquidity injected by central banks. But the depreciation of the dollar in the last few months and signs that major central banks are preparing to reduce their support have been relaunched.

The platforms of e-commerce transactions are also reporting a strong increase in transaction volumes on the markets of fixed rates.

CLS, an important intermediary in the foreign exchange market recorded a daily average of transactions of 1.805 billion ($1.447 billion) in January, up 24% year on year and 15.6% compared to December.

“During the last six months of 2017, we observed a trend to the increase in the annual rate (…) but the market has really taken off in January,” said David Puth, the director-general of the group.

CLS has added that volumes had increased further in early February: in the period from 5 to 8, there was an increase of 14% compared to January, reaching 2.054 billion of average daily.

THE VOLATILITY IS EXPECTED TO INCREASE FURTHER

Thomson Reuters has announced that the trading volumes on the currency passing through its platforms, which had reached a record high in January, at 432 billion in daily average.

The group makes the connection with the entry into force in early January of the new european directive on markets in financial instruments directive (MiFID II), which aims among other things to increase the transparency of markets.

This regulatory change has also contributed to the growth of volumes of electronic transactions in the bond markets. MarketAxess, one of the main platforms, has announced that his activity had scored a record at $ 7.3 billion as a daily average in January, an increase of 22% year on year.

“The month of January has been lively because it marked the beginning of the new phase of dollar depreciation and that there has been the ECB,” said for Reuters Stephen Jefferies, director of trading currencies and emerging markets of JPMorgan (NYSE:JPM) for Europe, the Middle East and Africa, in reference to the report of monetary policy of the european central Bank (ECB), which has rekindled speculation about monetary tightening in the euro zone.

Volatility on the euro-dollar parity, the more treated on the foreign exchange market, remained below its long-term average, even after its recent rise, he added.

It could, however, increase with the acceleration expected from the movement of balance sheet reduction by central banks and the rise in inflation expectations.

“The strategic shift of banks has important implications for the currency,” said Neil Jones, head of sales of foreign currencies to hedge funds at Mizuho in London.

(Tommy Wilkes, Marc Angrand for the French service)