FX Trading Volume Jumps 5% YoY as Currencies Become More Volatile

Neither the author, Ruholamin Haqshanas, nor this website, The Tokenist, provides financial advice. Please review our website policy before making any financial decisions.

The volume of trade in the foreign exchange market reached record levels thanks to unprecedented volatility caused by the war in Europe, as well as galloping inflation. This led to currency trading platforms experiencing a significant uptick in average daily volume (AVD) and revenue during the first quarter of the year.

Euronext announces a 58% jump in its turnover in the first quarter

Euronext, a pan-European exchange that offers trading and post-trade services on various assets, including stocks, exchange-traded funds (ETFs), bonds, derivatives, commodities, currencies and indices, recorded an increase of more than 58% in its turnover for the 1st quarter.

The group’s profit amounted to 395.7 million euros, driven by growth in non-volume and trading activities. The group’s total trading turnover amounted to €150.8 million, an increase of more than 57% year-on-year (YOY).

Notably, demand for currency trading on Euronext jumped 18%, bringing 7.2 million euros in revenue to the group. Additionally, average daily volume (ADV) with FX trading increased by 14% to $24.5 billion.

Overall, the first quarter of 2022 marked the second best quarter ever for Euronext FX, both in terms of revenue and average daily volumes, thanks to increased volatility. The first quarter of 2020 was the best quarter for Euronext FX when forex trading generated 8.0 million euros in revenue.

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FX trading volume up 5% YoY

The volume of transactions in the foreign exchange market has reached record levels all over the world. CLS, a multi-currency settlement system for FX transactions, said Thursday that average daily FX trading volume in April reached $1.86 trillion, a 5% year-on-year increase.

In a statement, CLS detailed that there was a 14% increase in spot trading and a 27% increase in futures activity. However, the settlement system noted that April volumes were down 12.5% ​​from March.

South Korea’s daily currency trading volume also hit new highs in the first quarter of the year. During the January-March period, daily forex turnover averaged $65.55 billion, up about 15% from three months earlier, according to data from the central bank.

The heightened interest in forex trading, caused by heightened market volatility, comes as the US Federal Reserve attempts to stamp out inflation by raising rates. In mid-March, the central bank announced its first rate hike in more than three years, a move of 0.25 percentage points.

In early May, the Fed raised interest rates another 0.50% and signaled it would raise borrowing costs further throughout the year as it tries to combat the surge of inflation. The Fed also revealed a strategy to reduce its assets, saying that starting June 1, it would allow up to $47.5 billion a month to come off its balance sheet.

In addition to rate hikes, concerns about the economic consequences of the war in Ukraine also contributed to increased currency volatility. The war has already had a negative impact on the Russian ruble and the euro, which is now trading just above $1.05, down from around $1.22 last June.

Meanwhile, currency volatility can also provide arbitrage opportunities for crypto users. For example, users can trade stablecoins pegged to the US dollar for stablecoins pegged to the euro or other currencies and profit from the volatility of the forex market.

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Do you expect volatility in the forex market to continue in the second quarter of the year? Let us know in the comments below.

About the Author

Ruholamin Haqshanas is an accomplished crypto and finance journalist with over two years of writing experience in the field. He has a strong understanding of various segments of the FinTech space, including the decentralized iteration of financial systems (DeFi) and the emerging non-fungible token (NFT) market. He is an active user of digital assets for remittances.

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