FX Turnover

Includes: FXE, FXY, MXNS, UDN, UUP
by: Marc Chandler

(Click to enlarge)

The Economist drew from the latest survey of the Bank of International Settlements to create this Great Graphic that shows the average daily turnover of the top 16 currencies.

Average daily turnover is a mind-numbing $5.3 trillion. In three days foreign exchange turnover is sufficient to cover world trade in a year.

The BIS conducts the survey every three years. The last survey in 2010 found daily turnover was about $4 trillion. The U.S. dollar's turnover alone is larger than that now. In 2007, the average daily turnover was $3.3 trillion. In six years then, the turnover has increased by 60%. Some observers are concerned that the post-crisis regulatory environment was going to curtail financial activity. Evidence must be sought elsewhere, outside of foreign exchange, the largest of the capital markets.

Despite cries that the dollar is being replaced by the euro or Chinese yuan, the BIS data shows nothing of the kind. The dollar is by far and away the most actively traded currency and is on one side of 87% of foreign exchange trades. The euro and yen have kept their status as #2 and #3.

Of particular note is the rise of the Mexican peso and Chinese yuan into the top ten most actively traded currencies. It is the first time. A rising tide lifts all boats, so to speak. Increased turnover means that it is not a zero-sum exercise. That is, the increased turnover of the peso and yuan does not mean a diminished role for the major currencies.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.