The Forex Market in 2013: A Statistical Anomaly

Features

  • Author: Digital Media Circle
  • Date: 19 Mar 2014
  • Copyright: Image appears courtesy of iStock Photo

In recent weeks in which the US Dollar (USD) has both soared and swooped against rival currencies, it is worth pausing for a moment and considering what has been an incredible year for the foreign exchange. After prolonged recession in the eurozone, the short-term shut-down of the federal government and subsequent bursts of robust economic growth, this period of reflection may be just what investors need to regain the composure and develop an effective, forward-thinking strategy.

thumbnail image: The Forex Market in 2013: A Statistical Anomaly

With this in mind, let’s take a look at some of the most eye-catching statistics from the forex market in 2013, and attempt to identify how they have influenced the sector and wider economic conditions. Consider the following: -

Forex Trading Volume and the Market Share

As expected, the currency trading market experienced record levels of interaction and participation throughout during 2013. In sheer numerical terms, this translated into daily transactions worth an average $5.3 trillion on the market, and this estimation was made during a BIS Triennial Central Bank survey at the turn of the financial year last April. Interestingly, the world’s largest financial centres in the U.S., UK, Singapore and Japan dominated foreign exchange trading, accounting for approximately 71% of all activity during 2013. This has risen from just 66% in 2010, and proves that the traditional financial super-powers remain omnipotent despite the rising influence of developing and emerging economies from across the globe.

All Hail the US Dollar: The King of Transactions

With this in mind, it should come as no surprise that the USD remains the king of all foreign exchange transactions. More specifically, it accounted for one side of more than 87% of all trades during April last year, which average out to an estimated 84% over the course of the year. The USD was also the only currency to remain relatively stable throughout the year in terms of value, as while the Euro (EUR) accounted for the second-highest number of transactions its rate of participation fell from 39% in 2010 to 33% in 2013. That said, these two currencies will remain the most widely traded in 2014, especially as the U.S. and eurozone economies continue to showcase signs of sustainable growth.

Which Emerging Economies and Currencies will Hold Sway in 2014?

The foreign exchange is a constantly evolving marketplace, and there are always new currencies emerging onto the scene. In 2013 it was the turn of the Chinese Renminbi and the Mexican Peso to take centre stage, as both positioned themselves in the top ten of the years’ most traded currencies. While the Chinese economy may have taken a slight backwards step at the beginning of this year, however, the Mexican equivalent remains strong and looks likely to underpin an increasingly robust and influential currency in 2014. Now at number eight in the currency list and involved in a relatively impressive 2.5% of all global transactions, the Mexican Peso is likely to become a prominent feature of the forex market and deliver a timely boost for Central American commerce.

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