Singapore is third-largest forex centre globally and tops in Asia: Survey

Britain in first place, while US, HK and Japan round out top five, says poll of 53 central banks

The study ranked Singapore as the third-largest financial centre, holding 7.6 per cent of the global share of forex trading. PHOTO: ST FILE

Singapore has retained its position as the largest foreign exchange centre in the region and the third-largest globally, after Britain and the United States, according to survey results released today.

The results were published by the Bank for International Settlements as part of its poll on the global foreign exchange and over-the-counter (OTC) derivatives markets.

The survey is held once every three years.

A total of 53 central banks, including the Monetary Authority of Singapore (MAS), participated in the survey, which measured the turnover of forex and OTC derivatives markets in April this year.

The study ranked Singapore as the third-largest financial centre, holding 7.6 per cent of the global share of forex trading.

The largest financial centre globally was Britain, which held 43.1 per cent, followed by the US, which held 16.5 per cent.

Trailing Singapore closely were Hong Kong, holding 7.6 per cent, and Japan, with 4.5 per cent of the global share.

These top five financial centres facilitated 79 per cent of global forex trading, the report noted.

The average daily trading volume of Singapore's foreign exchange market in April was US$633 billion (S$870 billion), up 22 per cent from US$517 billion three years ago.

The MAS said in a media release that this means Singapore's forex trading volume reached a new high.

This is in line with global forex volumes, which hit US$6.6 trillion in April this year, a 30 per cent increase from April three years ago.

However, Singapore's forex trading volume growth this round was slightly lower than its growth in 2016, when the figure went up by 35 per cent, compared with the average daily trading volume of US$383 billion in 2013.

CIMB Private Banking economist Song Seng Wun said that general economic and political volatility caused increased market activity, contributing to the growth in forex trading volume globally.

"Market activity has been reacting to US President Donald Trump's comments, together with geopolitical and regional tensions. Events such as Brexit have contributed to a surge in forex volatility, while monetary policy is being eased around the world," he said.

"Forex trading activity will probably continue to rise, reflecting the volatile environment," he added.

Associate Professor Lawrence Loh from the National University of Singapore Business School, said that the volatility has also attracted more transactions from high-frequency traders and even more retail traders coming into the market.

"At the same time, the demand for forex is fuelled by its derivatives such as futures, options and swaps, which are sought after by traders to hedge risk in times of turbulent uncertainties," he said.

The Singapore market also registered well-diversified growth, with the top five traded currencies being the US dollar, Japanese yen, euro, Australian dollar and Singapore dollar.

However, turnover in the yen declined by 4 per cent, in line with declines in the US and Japan, while turnover in the Hong Kong dollar rose by more than 200 per cent, due to volatility in the dollar and the Hong Kong Interbank Offered Rate during the survey period.

MAS deputy managing director Jacqueline Loh said: "Global and regional forex players continue to expand their regional footprint in Singapore and are investing heavily in building up their skills and trading infrastructure, including in forex e-trading.

"We expect these investments to bear fruit in the medium term and further improve the trading landscape for market participants, and enhance price discovery, liquidity and transparency in the Asian time zone."

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A version of this article appeared in the print edition of The Straits Times on September 17, 2019, with the headline Singapore is third-largest forex centre globally and tops in Asia: Survey. Subscribe