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FX volatility sparks trading surge with signs of more to come

Price swings in the $5.1tr-a-day currency market have jumped this month to their highest since November 2016

Gulf News

New York: The past week’s financial-market turbulence is keeping foreign-exchange traders busy, boosting volumes along with volatility.

Price swings in the $5.1-trillion (Dh18.73 trillion) a day currency market have jumped this month to the highest since November 2016 on a monthly basis, according to a JPMorgan Chase & Co. gauge. The turmoil coincides with surging trading activity, say JPMorgan and CLS Group Holdings AG, which settles global foreign-exchange transactions.

As heads of currency trading from the world’s biggest asset managers and banks gather at the TradeTech FX conference in Miami this week, they’re fixated on whether the turmoil will persist. If it does, it could be a boon for speculators, while complicating the tasks of hedgers who prefer more placid waters.

“Volatility is natural to markets — low volatility is not natural,” said Isaac Lieberman, chief executive officer of Aston Capital Management LLC in New York.

Market gyrations have returned to FX after a subdued 2017, which was the calmest year since 2012, according to the JPMorgan gauge. As other central banks look to follow the Federal Reserve in withdrawing monetary accommodation against a backdrop of strengthening global growth, there are plenty of catalysts that could whipsaw markets.

“Market activity is really taking off,” said David Puth, chief executive officer of CLS Group.

CLS settled an average of almost $2.1 trillion of currency trades a day from Monday to Thursday last week, up 14 per cent from January’s average, the company said in a statement.

As markets became more volatile over the last two months, JPMorgan’s clients boosted their use of the bank’s currency algorithms, according to Richard James, co-head of macro markets execution in London. The number of users trading on the bank’s electronic platform also grew, with every day last week exceeding the highest level seen in 2017.

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