BIS: Global Currency Markets Explode

According to a triennial central bank survey of foreign exchange activity just released by the Bank for International Settlements (BIS):

1. Daily turnover in global currency markets rose to $3.2 trillion in 2007, which is a 71% increase since the last survey in 2004, when daily foreign exchange trading volume was $1.87 trillion.

2. The 71% increase is the largest percent jump in daily currency trading since the BIS began conducting its benchmark survey in 1989.

3. Foreign exchange trading in the U.S. increased by 44% over the last three years, from $461 billion in 2004 to $664 billion this year (see chart above).

4. Trading in financial derivatives linked to currencies soared to $2.1 trillion a day, the report said, a rise of more than 70% since 2004. Large companies are also taking a more active and sophisticated approach to managing currency exposure.

5. Currency trading in the U.K. ($1.359 trillion per day), the world's largest currency center, represented 42.5% of world currency volume, and trading in the U.S. (ranked #2 at $664 billion daily) represented about 21% of world currency volume. Together, the U.K. and U.S. account for more than 63% of the world's currency trading every day.

6. To put $3.2 trillion of daily currency trading in perspective, consider that $3.2 trillion is greater than the ANNUAL Gross Domestic Product of Germany ($2.9 trillion), China ($2.6 trillion) and the U.K. ($2.4 trillion). In the U.K., more currency is traded in London in two days ($2.77 trillion) than the value of all goods and services ($2.4 trillion) produced in the country in a year!

Read more here in today's Wall Street Journal.