Foreign Exchange Blog
Updated Forex Statistics
The Bank for International Settlements (BIS) reported results from a survey of 54 central banks that in April, 2007, daily trading of currencies reached $3.2 trillion; USD remains the most important currency in the forex markets today, constituting 2/5 of all currency transactions. Total forex trading has risen more than 71% over 2004 levels—the largest increase since the BIS started doing the survey in 1989. Improved and cheaper technology has augmented the increase. Hedge funds and individual investors represented a significant part of the increase. The use of currency derivatives to hedge risk or make profits has also increased significantly—70% since 2004, with over $2.1 trillion worth traded daily. The largest increase, 281%, was in cross-currency swaps which are used to hedge bonds denominated in foreign currency. Cross-currency swaps are transacted when 2 parties agree to exchange interest payments in different currencies for a specified time. Emerging market currencies now account for almost 20% of all currency trading.
Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity
Different Ways to Invest in Currency
Betting on the Buck
There are other ways of investing in currency besides buying the currency itself. Now with the U.S. dollar at historic lows against other currencies, some banks have introduced new products to take advantage of the current currency market. Barclays PLC, for instance, has recently introduced 3 exchange-traded notes (ETNs) that offer investment opportunities in the Euro, yen, and the pound.
Other ways to invest in foreign currency is to buy foreign bonds or stocks, or to invest in currency mutual funds, or bond funds, or to invest in trusts that hold bank deposits in foreign countries, such as the CurrencyShares Euro Trust from Rydex Investments. However, some of these investments may have more risk than the currency alone, since some investments are using leverage, futures, or other derivatives to increase returns, which also increases potential losses.
Other investment vehicles are trying to benefit from the risky carry trade, where futures are bought in countries with a high interest rate and sold in countries with a low interest rate.
Currency Exchange Resources
Market Overview: Foreign Exchange Rates/Currencies, Key Cross Rates and Currency Converter - MarketWatch
Displays quotes for current foreign exchange rates for the world's major currencies, that is updated continually. Includes a currency converter, news about the currency markets, and provides cross rates for the U.S. dollar (USD), the United Kingdom pound (GBP), the Euro (EUR), and the Japanese Yen (JPY). Also has basic, advanced, and interactive charts that displays the exchange rates over time.