The dollar rose the most against the euro in more than a week as signs of growth faltering in Europe contrasts with an improving U.S. economy.
The 18-nation shared currency dropped after reports showed industrial production in the region slumped and Germany’s government cut the economic outlook for this year and the next. The pound fell against most of its major peers as a report showed U.K. inflation declined to a five-year low. The Swedish krona plunged after deflation worsened. The yen rose against most major peers on haven demand.
“The situation in Europe continues to deteriorate, but the concern is spilling over into the global economy,” said Sireen Harajli, a Mizuho Bank Ltd. strategist in New York. “The dollar continues to benefit in this environment, in our view, and the incoming data continues to support that.” The dollar strengthened 0.8 percent to $1.2648 per euro at 2:06 p.m. New York time, the biggest intraday gain since Oct. 3 and recovered most of yesterday’s 1 percent decline. The greenback climbed 0.2 percent to 107.05 yen. The yen strengthened 0.6 percent to 135.38 per euro.
The dollar pared a decline from yesterday triggered by Federal Reserve comments that slower global growth may delay U.S. interest-rate increases. The U.S. economy will expand 2.2 percent this year and 3 percent in 2015, according to Bloomberg News surveys. The euro area will grow 0.8 percent and 1.3 percent, while Japan’s will expand 1 percent in 2014 and 1.2 percent the following year, the surveys predict.
Haven Demand
“Weak data is undermining the euro, with inflation expectation retreating again, that’s no good for the euro,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “Yen crosses can probably outperform partly in an environment where risk aversion seems to be creeping back into the market’s thinking.”
The yen gained versus most of its major peers as concern global economic growth is faltering and the risk of Ebola spreading prompted demand for haven assets. The Japanese government will release finalized data on industrial production tomorrow. Output unexpectedly fell 1.5 percent in August from the previous month, according to the initial reading.
Germany’s Economy Ministry cut its 2014 forecast to 1.2 percent from 1.8 percent previously, and slashed its estimate for next year to 1.3 percent from 2 percent. Data earlier showed investor confidence in the European nation fell to the weakest level in almost two years.
Inflation Expectations
The euro also slid as Eurostat said industrial production in the euro area declined 1.8 percent in August, matching September 2012’s level which was the least since 2009. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which seeks to predict economic developments six months in advance, fell to minus 3.6 in October, the lowest level since November 2012.
Inflation expectations in the euro zone fell to the lowest in at least six years. The 5-year, 5-year inflation swap rate fell to 1.82 percent, the lowest since Bloomberg started compiling the data in September 2008.
Options traders are betting on further weakness in the euro, 25 delta risk-reversals show. Traders are willing to pay a higher price for options to buy the dollar than to sell it for every period from one day to 10 years, according to data compiled by Bloomberg. One-year options are the most expensive, with a premium of 1.028 percentage points. The krona slid at least 0.3 percent against all 31 of its major peers as Statistics Sweden said consumer prices fell 0.4 percent on an annual basis in September. The median forecast in a Bloomberg News survey was for a drop of 0.1 percent.
Sweden’s currency declined 1.9 percent to 7.2526 per dollar and weakened 1.2 percent to 9.1775 per euro.
Merkel Vows Austerity Even as Growth Projection Cut
Chancellor Angela Merkel told lawmakers that Germany won’t raise public spending to stimulate the economy even after her government slashed growth forecasts for this year and next, a party official said.
Europe’s biggest economy will probably grow by 1.2 percent this year and by 1.3 percent in 2015, marking respective drops from 1.8 percent and 2.0 percent forecast in April, the Economy Ministry said today. Merkel, addressing a closed-door meeting of members of her Christian Democratic Union-led bloc in Berlin today, vowed that her government will pursue its balanced budget goal regardless of the outlook, according to the CDU official, who asked not to be named because the session was private.
“We’re agreed in the German federal government that we must stay the course even in difficult times,” Finance Minister Wolfgang Schaeuble told reporters in Luxembourg today after a meeting of European Union finance ministers. A separate party official who attended the Berlin meeting told reporters later that Merkel said it’s more important than ever for the EU to hold to its rules and that Germany’s stance is crucial. If Germany deviates from its fiscal position, it would give other countries a reason to do likewise, she said.
“This, in a word, is silly: Germany should borrow money and invest in infrastructure to boost growth,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said by phone. “Merkel and others have invented a story about how Germany always had an austere budget. Yet in postwar history, Germany has repeatedly shown far more fiscal policy flexibility to lift growth.”
‘Rough Waters’
Economy Minister Sigmar Gabriel said exports are “in extremely rough waters,” buffeted by geopolitical developments including the Ukraine crisis, according to an e-mailed statement. The Social Democrat, whose party is the junior partner in Merkel’s government, urged the coalition to boost infrastructure spending to underpin demand.
The latest forecasts suggest that Merkel’s plan to balance the budget to the last euro cent may be in doubt unless the economy grows faster. Merkel snubbed calls earlier this month from euro-area partners and the International Monetary Fund to spend more to stave off weakening growth. Gabriel said he still expects the government to balance its books, though the economic growth reduction “will have an impact” on the budget, he said today at a press conference in Berlin, without being more specific.
Forecast Cut
The IMF cut its euro-area growth forecasts last week to 0.8 percent for 2014 and 1.3 percent next year. With 40 percent of Germany’s exports going to the rest of the 18-nation euro area, the weakness of its currency partners is hitting Germany’s industry.
German export data plunged the most since January 2009 in August. The ZEW investor confidence gauge, a prediction of economic development six months ahead, fell today to the weakest level in almost two years. Germany may just avoid recession as the economy shows almost no second-half growth, the country’s leading economic institutes said. German exports may grow by 3.4 percent this year and 4.1 percent in 2015, the Economy Ministry review said, citing projected improvements in global economic growth next year. Exports account for 40 percent of Germany’s economy, according to the Federal Statistics Office.
German domestic demand, buoyed by employment that will grow by about 500,000 by the end of next year, will be the main motor for economic growth, the report said.
Heed Warnings
Still, the German government must heed warning signals from the economy, SPD parliamentary Deputy Chairman Carsten Schneider said, cited in today’s Sueddeutsche Zeitung newspaper. If Germany enters recession, the government should prepare a supplementary budget, Schneider said. Such a move would automatically spoil the prospects of balancing the budget.
The situation Germany faces can’t be compared with the financial crisis that led to the worst recession in living memory, the official cited Merkel as saying. The reason for the economic cooling is decreasing demand from other countries rather than German coalition policies. It’s still important to focus on growth now, especially in the digital economy, she was cited as saying.
Pound Falls Versus Dollar as U.K. Inflation Slows
The pound fell to an 11-month low against the dollar as a report showed U.K. inflation slowed to the least in five years last month, adding to pressure on the Bank of England to keep interest rates at record lows.
Sterling weakened versus all but two of its 16 major peers after a report showed annual consumer-price growth slowed to 1.2 percent, from 1.5 percent in August. U.K. 10-year government bonds climbed for a seventh day, the longest winning run since August 2011, pushing the yield to the lowest in more than a year. Yields on two-year gilts, more sensitive to rate expectations, fell the most since August, while short-sterling futures contracts rose.
“The market spent the first half of the year getting excited about how quickly the BOE might have to hike,” said Daragh Maher, a foreign-exchange strategist at HSBC Holdings Plc in London. “Now they’re having to delay those expectations. The real surprise is that there’s not been an even bigger sterling selloff in response to this sizable downside surprise.” The pound fell 1 percent to $1.5926 as of 4:36 p.m. London time after dropping to $1.5905, the lowest since Nov. 13. Sterling depreciated 0.3 percent to 79.50 pence per euro and reached 79.61 pence, the weakest level since Sept. 17.
Today’s consumer-price data mark a ninth month below the BOE’s 2 percent inflation target. A separate report from the British Retail Consortium and KPMG LLP showed retail sales unexpectedly fell last month from a year earlier. Like-for-like retail sales dropped 2.1 percent in the year through September, compared with the 1 percent increase predicted by economists surveyed by Bloomberg.
Rate Expectations
Forward contracts based on the sterling overnight interbank average, or Sonia, showed investors have pushed back bets on a 25 basis-point increase in borrowing costs to after September, from February just two months ago. The implied yield on short-sterling futures contracts expiring in December 2015 fell as much as 13 basis points, or 0.13 percentage point, to 1.02 percent.
“This figure eliminates any chance of a rate rise this year and bets of a hike in Q1 will be scaled back considerably,” said Harry Adams, the head of trading at Argentex LLP, a currency advisory company in London. “Sterling is likely to be punished by the dollar as European risks accelerate.” The U.K. 10-year break-even rate, the difference between yields on gilts and index-linked securities, dropped to as low as 2.59 percentage points today, the least since November 2012.
BOE Governor Mark Carney said in a CNBC interview yesterday that weak global demand is producing a benign inflation backdrop.
‘On Hold’
“The Bank of England is going to stay on hold much longer,” Manish Singh, who helps oversee $2 billion as head of investments at Crossbridge Capital in London, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro. “They have been giving this indication in their last few communications.”
Royal Bank of Scotland Group Plc pushed back its forecast for the first rate increase by the BOE to August from February, strategists Ross Walker and Andrew Roberts wrote in an e-mailed note today. The 10-year gilt yield dropped four basis points to 2.13 percent and touched 2.07 percent, the lowest since June 2013. The 2.75 percent bond due in September 2024 climbed 0.38, or 3.80 pounds per 1,000-pound face amount, to 105.545.
Rates on two-year gilts dropped as much as nine basis points to 0.56 percent, the lowest level since Feb. 28.
‘Further Stimulus’
“The U.K. data reinforce the increasingly acknowledged theme of weakening global growth,” Rabobank International strategists led by Richard McGuire, the London-based head of European rates strategy, wrote in an e-mailed note.
Weak price growth “stands to challenge rate-hike expectations on both sides of the Atlantic, while it is not inconceivable that, as inflationary pressures continue to subside, speculation could ultimately build over the need for further stimulus,” the strategists wrote. Gilts are the best-performing sovereign securities tracked by Bloomberg World Bond Indexes in the past month, having risen 3.2 percent through yesterday. Euro-area government securities gained 1 percent and U.S. Treasuries 1.9 percent.
Currency Comeback Seen in Record $5.9 Trillion a Day at CLS
CLS Group Holdings AG, operator of the world’s largest currency-trading settlement system, handled a record $5.94 trillion a day in September as volumes recovered from a slump in price swings that crimped activity. The average value of transactions settled by CLS each day rose 21 percent from August, it said in a statement. The New York-based company settled more than 2 million payments on Sept. 17, the most since its creation 12 years ago.
The comeback may bring relief to banks that have seen trading fees shrink, squeezing earnings. Volatility has returned to currency markets amid diverging monetary policy among the world’s central banks. In previous quarters, price movements had lessened amid increased regulatory scrutiny that followed a series of price-fixing investigations.
“Both ticket size and quantity have shot up in line with the increase in volatility,” Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London, said by phone. “For the first nine months of the year, foreign-exchange had been tough for investors to generate returns. Since mid-August, direction has come back to the dollar and that accounts for much of the increase in business.”
The U.S. dollar has strengthened against each of its 31 major peers, except China’s yuan, in the last three months.
Price Swings
A gauge of global price swings has jumped 45 percent from its nadir in early July as central banks including the Federal Reserve and Bank of England moved closer to increasing borrowing costs while their peers in Japan and the euro area remained committed to looser monetary policies. That’s spurred an increase in profits from trading. The Parker Global Currency Manager Index, which tracks returns of 14 leading foreign-exchange funds, jumped 3.29 percent in the three months through September to post its biggest quarterly gain since 2004.
The JPMorgan Global FX Volatility Index was at 7.67 percent today, up from a record low on a closing basis of 5.29 percent on July 3. Subdued interest rates across the globe had helped suppress price swings in the first half of the year, reducing the opportunity for traders to profit from differences in exchange rates.
Assets managed by funds focused on foreign exchange shrank 6.4 percent in the first half of 2014 to $18.4 billion, after a 20 percent drop last year, according to data compiled by Hedge Fund Research Inc.
ICAP Platform
CLS is owned by financial services institutions such as Bank of America Corp. and Bank of China Ltd. which it says together account for more than half of currency-market transactions. It is not alone in seeing a surge in orders. ICAP Plc’s EBS platform saw its average daily volume rise to $117.9 billion last month, after slumping to $68.5 billion in April, the lowest amount in data going back to 2006. Thomson Reuters Corp.’s venues also saw an increase in spot foreign-exchange trading in September.
Bloomberg LP, the parent company of Bloomberg News, operates a rival trading platform. Banks and their clients rely on CLS Group to process payments for currency transactions. Without a body to settle trades, market participants risk losing money if a counterparty failed to fulfill its side of a deal.
source: Bloomberg
The 18-nation shared currency dropped after reports showed industrial production in the region slumped and Germany’s government cut the economic outlook for this year and the next. The pound fell against most of its major peers as a report showed U.K. inflation declined to a five-year low. The Swedish krona plunged after deflation worsened. The yen rose against most major peers on haven demand.
“The situation in Europe continues to deteriorate, but the concern is spilling over into the global economy,” said Sireen Harajli, a Mizuho Bank Ltd. strategist in New York. “The dollar continues to benefit in this environment, in our view, and the incoming data continues to support that.” The dollar strengthened 0.8 percent to $1.2648 per euro at 2:06 p.m. New York time, the biggest intraday gain since Oct. 3 and recovered most of yesterday’s 1 percent decline. The greenback climbed 0.2 percent to 107.05 yen. The yen strengthened 0.6 percent to 135.38 per euro.
The dollar pared a decline from yesterday triggered by Federal Reserve comments that slower global growth may delay U.S. interest-rate increases. The U.S. economy will expand 2.2 percent this year and 3 percent in 2015, according to Bloomberg News surveys. The euro area will grow 0.8 percent and 1.3 percent, while Japan’s will expand 1 percent in 2014 and 1.2 percent the following year, the surveys predict.
Haven Demand
“Weak data is undermining the euro, with inflation expectation retreating again, that’s no good for the euro,” Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, said by phone from Toronto. “Yen crosses can probably outperform partly in an environment where risk aversion seems to be creeping back into the market’s thinking.”
The yen gained versus most of its major peers as concern global economic growth is faltering and the risk of Ebola spreading prompted demand for haven assets. The Japanese government will release finalized data on industrial production tomorrow. Output unexpectedly fell 1.5 percent in August from the previous month, according to the initial reading.
Germany’s Economy Ministry cut its 2014 forecast to 1.2 percent from 1.8 percent previously, and slashed its estimate for next year to 1.3 percent from 2 percent. Data earlier showed investor confidence in the European nation fell to the weakest level in almost two years.
Inflation Expectations
The euro also slid as Eurostat said industrial production in the euro area declined 1.8 percent in August, matching September 2012’s level which was the least since 2009. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which seeks to predict economic developments six months in advance, fell to minus 3.6 in October, the lowest level since November 2012.
Inflation expectations in the euro zone fell to the lowest in at least six years. The 5-year, 5-year inflation swap rate fell to 1.82 percent, the lowest since Bloomberg started compiling the data in September 2008.
Options traders are betting on further weakness in the euro, 25 delta risk-reversals show. Traders are willing to pay a higher price for options to buy the dollar than to sell it for every period from one day to 10 years, according to data compiled by Bloomberg. One-year options are the most expensive, with a premium of 1.028 percentage points. The krona slid at least 0.3 percent against all 31 of its major peers as Statistics Sweden said consumer prices fell 0.4 percent on an annual basis in September. The median forecast in a Bloomberg News survey was for a drop of 0.1 percent.
Sweden’s currency declined 1.9 percent to 7.2526 per dollar and weakened 1.2 percent to 9.1775 per euro.
Merkel Vows Austerity Even as Growth Projection Cut
Chancellor Angela Merkel told lawmakers that Germany won’t raise public spending to stimulate the economy even after her government slashed growth forecasts for this year and next, a party official said.
Europe’s biggest economy will probably grow by 1.2 percent this year and by 1.3 percent in 2015, marking respective drops from 1.8 percent and 2.0 percent forecast in April, the Economy Ministry said today. Merkel, addressing a closed-door meeting of members of her Christian Democratic Union-led bloc in Berlin today, vowed that her government will pursue its balanced budget goal regardless of the outlook, according to the CDU official, who asked not to be named because the session was private.
“We’re agreed in the German federal government that we must stay the course even in difficult times,” Finance Minister Wolfgang Schaeuble told reporters in Luxembourg today after a meeting of European Union finance ministers. A separate party official who attended the Berlin meeting told reporters later that Merkel said it’s more important than ever for the EU to hold to its rules and that Germany’s stance is crucial. If Germany deviates from its fiscal position, it would give other countries a reason to do likewise, she said.
“This, in a word, is silly: Germany should borrow money and invest in infrastructure to boost growth,” Fredrik Erixon, director of the European Centre for International Political Economy in Brussels, said by phone. “Merkel and others have invented a story about how Germany always had an austere budget. Yet in postwar history, Germany has repeatedly shown far more fiscal policy flexibility to lift growth.”
‘Rough Waters’
Economy Minister Sigmar Gabriel said exports are “in extremely rough waters,” buffeted by geopolitical developments including the Ukraine crisis, according to an e-mailed statement. The Social Democrat, whose party is the junior partner in Merkel’s government, urged the coalition to boost infrastructure spending to underpin demand.
The latest forecasts suggest that Merkel’s plan to balance the budget to the last euro cent may be in doubt unless the economy grows faster. Merkel snubbed calls earlier this month from euro-area partners and the International Monetary Fund to spend more to stave off weakening growth. Gabriel said he still expects the government to balance its books, though the economic growth reduction “will have an impact” on the budget, he said today at a press conference in Berlin, without being more specific.
Forecast Cut
The IMF cut its euro-area growth forecasts last week to 0.8 percent for 2014 and 1.3 percent next year. With 40 percent of Germany’s exports going to the rest of the 18-nation euro area, the weakness of its currency partners is hitting Germany’s industry.
German export data plunged the most since January 2009 in August. The ZEW investor confidence gauge, a prediction of economic development six months ahead, fell today to the weakest level in almost two years. Germany may just avoid recession as the economy shows almost no second-half growth, the country’s leading economic institutes said. German exports may grow by 3.4 percent this year and 4.1 percent in 2015, the Economy Ministry review said, citing projected improvements in global economic growth next year. Exports account for 40 percent of Germany’s economy, according to the Federal Statistics Office.
German domestic demand, buoyed by employment that will grow by about 500,000 by the end of next year, will be the main motor for economic growth, the report said.
Heed Warnings
Still, the German government must heed warning signals from the economy, SPD parliamentary Deputy Chairman Carsten Schneider said, cited in today’s Sueddeutsche Zeitung newspaper. If Germany enters recession, the government should prepare a supplementary budget, Schneider said. Such a move would automatically spoil the prospects of balancing the budget.
The situation Germany faces can’t be compared with the financial crisis that led to the worst recession in living memory, the official cited Merkel as saying. The reason for the economic cooling is decreasing demand from other countries rather than German coalition policies. It’s still important to focus on growth now, especially in the digital economy, she was cited as saying.
Pound Falls Versus Dollar as U.K. Inflation Slows
The pound fell to an 11-month low against the dollar as a report showed U.K. inflation slowed to the least in five years last month, adding to pressure on the Bank of England to keep interest rates at record lows.
Sterling weakened versus all but two of its 16 major peers after a report showed annual consumer-price growth slowed to 1.2 percent, from 1.5 percent in August. U.K. 10-year government bonds climbed for a seventh day, the longest winning run since August 2011, pushing the yield to the lowest in more than a year. Yields on two-year gilts, more sensitive to rate expectations, fell the most since August, while short-sterling futures contracts rose.
“The market spent the first half of the year getting excited about how quickly the BOE might have to hike,” said Daragh Maher, a foreign-exchange strategist at HSBC Holdings Plc in London. “Now they’re having to delay those expectations. The real surprise is that there’s not been an even bigger sterling selloff in response to this sizable downside surprise.” The pound fell 1 percent to $1.5926 as of 4:36 p.m. London time after dropping to $1.5905, the lowest since Nov. 13. Sterling depreciated 0.3 percent to 79.50 pence per euro and reached 79.61 pence, the weakest level since Sept. 17.
Today’s consumer-price data mark a ninth month below the BOE’s 2 percent inflation target. A separate report from the British Retail Consortium and KPMG LLP showed retail sales unexpectedly fell last month from a year earlier. Like-for-like retail sales dropped 2.1 percent in the year through September, compared with the 1 percent increase predicted by economists surveyed by Bloomberg.
Rate Expectations
Forward contracts based on the sterling overnight interbank average, or Sonia, showed investors have pushed back bets on a 25 basis-point increase in borrowing costs to after September, from February just two months ago. The implied yield on short-sterling futures contracts expiring in December 2015 fell as much as 13 basis points, or 0.13 percentage point, to 1.02 percent.
“This figure eliminates any chance of a rate rise this year and bets of a hike in Q1 will be scaled back considerably,” said Harry Adams, the head of trading at Argentex LLP, a currency advisory company in London. “Sterling is likely to be punished by the dollar as European risks accelerate.” The U.K. 10-year break-even rate, the difference between yields on gilts and index-linked securities, dropped to as low as 2.59 percentage points today, the least since November 2012.
BOE Governor Mark Carney said in a CNBC interview yesterday that weak global demand is producing a benign inflation backdrop.
‘On Hold’
“The Bank of England is going to stay on hold much longer,” Manish Singh, who helps oversee $2 billion as head of investments at Crossbridge Capital in London, said in an interview on Bloomberg Television’s “On The Move” with Jonathan Ferro. “They have been giving this indication in their last few communications.”
Royal Bank of Scotland Group Plc pushed back its forecast for the first rate increase by the BOE to August from February, strategists Ross Walker and Andrew Roberts wrote in an e-mailed note today. The 10-year gilt yield dropped four basis points to 2.13 percent and touched 2.07 percent, the lowest since June 2013. The 2.75 percent bond due in September 2024 climbed 0.38, or 3.80 pounds per 1,000-pound face amount, to 105.545.
Rates on two-year gilts dropped as much as nine basis points to 0.56 percent, the lowest level since Feb. 28.
‘Further Stimulus’
“The U.K. data reinforce the increasingly acknowledged theme of weakening global growth,” Rabobank International strategists led by Richard McGuire, the London-based head of European rates strategy, wrote in an e-mailed note.
Weak price growth “stands to challenge rate-hike expectations on both sides of the Atlantic, while it is not inconceivable that, as inflationary pressures continue to subside, speculation could ultimately build over the need for further stimulus,” the strategists wrote. Gilts are the best-performing sovereign securities tracked by Bloomberg World Bond Indexes in the past month, having risen 3.2 percent through yesterday. Euro-area government securities gained 1 percent and U.S. Treasuries 1.9 percent.
Currency Comeback Seen in Record $5.9 Trillion a Day at CLS
CLS Group Holdings AG, operator of the world’s largest currency-trading settlement system, handled a record $5.94 trillion a day in September as volumes recovered from a slump in price swings that crimped activity. The average value of transactions settled by CLS each day rose 21 percent from August, it said in a statement. The New York-based company settled more than 2 million payments on Sept. 17, the most since its creation 12 years ago.
The comeback may bring relief to banks that have seen trading fees shrink, squeezing earnings. Volatility has returned to currency markets amid diverging monetary policy among the world’s central banks. In previous quarters, price movements had lessened amid increased regulatory scrutiny that followed a series of price-fixing investigations.
“Both ticket size and quantity have shot up in line with the increase in volatility,” Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London, said by phone. “For the first nine months of the year, foreign-exchange had been tough for investors to generate returns. Since mid-August, direction has come back to the dollar and that accounts for much of the increase in business.”
The U.S. dollar has strengthened against each of its 31 major peers, except China’s yuan, in the last three months.
Price Swings
A gauge of global price swings has jumped 45 percent from its nadir in early July as central banks including the Federal Reserve and Bank of England moved closer to increasing borrowing costs while their peers in Japan and the euro area remained committed to looser monetary policies. That’s spurred an increase in profits from trading. The Parker Global Currency Manager Index, which tracks returns of 14 leading foreign-exchange funds, jumped 3.29 percent in the three months through September to post its biggest quarterly gain since 2004.
The JPMorgan Global FX Volatility Index was at 7.67 percent today, up from a record low on a closing basis of 5.29 percent on July 3. Subdued interest rates across the globe had helped suppress price swings in the first half of the year, reducing the opportunity for traders to profit from differences in exchange rates.
Assets managed by funds focused on foreign exchange shrank 6.4 percent in the first half of 2014 to $18.4 billion, after a 20 percent drop last year, according to data compiled by Hedge Fund Research Inc.
ICAP Platform
CLS is owned by financial services institutions such as Bank of America Corp. and Bank of China Ltd. which it says together account for more than half of currency-market transactions. It is not alone in seeing a surge in orders. ICAP Plc’s EBS platform saw its average daily volume rise to $117.9 billion last month, after slumping to $68.5 billion in April, the lowest amount in data going back to 2006. Thomson Reuters Corp.’s venues also saw an increase in spot foreign-exchange trading in September.
Bloomberg LP, the parent company of Bloomberg News, operates a rival trading platform. Banks and their clients rely on CLS Group to process payments for currency transactions. Without a body to settle trades, market participants risk losing money if a counterparty failed to fulfill its side of a deal.
source: Bloomberg