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In forex trading, UK leads but US dollar is dominant currency

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In forex trading, UK leads but US dollar is dominant currency

London's foreign exchange market is more than twice the size of America's but the dollar reigns supreme as the leading currency.

Trading in foreign exchange markets reached $6.6 trillion a day in April 2019, when the Bank for International Settlements carried out its triennial survey of the market, which was up from $5.1 trillion three years earlier. The growth in foreign exchange derivatives trading, especially swaps, outpaced spot trading.

Forex trading: U.K. growth, dollar dominance

The survey revealed that the U.K. was by far the biggest center for foreign exchange trading. It accounted for 43% of global forex trading, up more than six percentage points in three years.

The U.S. came next with a 16.5% share, down three percentage points since last time, while the next biggest venue was Hong Kong with a share of 7.6%.

The share of foreign exchange trading in leading Asian financial centers, including Hong Kong, Singapore and Tokyo, declined slightly to 20% mainly because of slower growth of activity in Singapore and Tokyo. However, Hong Kong’s share of trading grew faster than the global rate.

Mainland China's share of the market has grown sharply in three years, up 87% to $136 billion in 2019 and it is now the eighth-largest foreign exchange trading center, up from 13th three years ago.

The U.S. dollar remained the dominant currency in foreign exchange trading, and was on one side of 88% of all trades. Next came the euro, with a 32% share, followed by Japan's yen with 17% share, down nearly five percentage points since last time due mostly to a slowdown in yen/U.S. dollar trading. U.K. sterling followed the yen with a share of 13%.

China’s renminbi remained the eighth most traded currency with a $284 billion turnover.

OTC derivatives

The BIS has also published a triennial survey of the over-the-counter derivatives market that showed a sharp rise in the sector's daily turnover to $6.5 trillion compared with $2.7 trillion in 2016. The bank said the rise appeared to have been driven by increased hedging and positioning amid greater economic uncertainty.

Again, the U.K. dominated the market, recording the highest average daily turnover at $3.7 trillion, or 50% of the global market. This was followed by the U.S. at $2.4 trillion, or 32% of global market share, and then Hong Kong at $436 million, or 6% global market share.

The average daily turnover in U.S. dollar-denominated contracts amounted to $3.3 trillion in April 2019, or about half of total turnover in all currencies, the same global market share as in 2016.

Turnover in euro-denominated contracts stood at $1.6 trillion in April 2019, or 24% of total turnover, unchanged since 2016. Turnover in contracts in China's renminbi stood at $33 billion, or 0.5% of the total, up slightly from 2016.