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UPDATE 1-Sterling trading volumes boosted by Brexit to record high

Tue, 4th Feb 2020 15:57

* UK average FX daily vols at record $2.88 trln in Oct -BoE

* Sterling surge, more swap trading boost overall volumes

* Chinese yuan volumes out of London dip 10%
(Adds details, quote, context)

LONDON, Feb 4 (Reuters) - Tortuous Brexit negotiations
helped send daily trading volumes in Britain's pound to a record
high last year, Bank of England data showed on Tuesday.

Increased activity in sterling, as well as more FX swap
turnover, also sent Britain's overall foreign exchange trading
volumes to a record $2.88 trillion per day across all
currencies, the BoE said in a survey of London's FX industry,
the world's biggest. That broader figure was up 11% on 2018.

The UK central bank conducts two such surveys per year, in
spring and autumn, and the latest one compared data from October
2019 with October 2018.

Its findings chime with the Bank of International
Settlement's triennial FX survey published in late 2019, which
showed record global FX trading volumes thanks to the growth of
FX swaps, and London cementing its position as the biggest
centre for trading currencies.

The BoE said on Tuesday that rising volumes of FX swaps,
outright forwards and non-deliverable forwards had offset
declines in spot and options trading.

Volatility in forex markets has dropped to record lows in
recent months, discouraging traders from buying and selling
currencies. Sterling was the outlier to that trend last year as
developments in the Brexit saga drove wild swings in the

"The increased levels of trading in sterling pairs is hardly
a surprise, given it has effectively been a proxy for one of the
most significant political events in a generation. However, the
decline in dollar/yuan is larger than most market observers
probably expected," said Dan Marcus, CEO of trading platform

Trading in dollar/sterling jumped 33% year-on-year to
$431 billion on average per day in October, accounting for 15%
of all transactions in London's market, the BoE said. That was
up from $322 billion and a 12.6% share in October 2018.

Last October was the month that nailbiting negotiations
between Brussels and London culminated in a new EU withdrawal
deal before Prime Minister Boris Johnson called a national

The New York Federal Reserve said on Tuesday in its own
survey that sterling/dollar posted the largest year-on-year
increase in October for any major currency pair.

Euro/sterling turnover out of London also rose,
beating the Chinese yuan/dollar as the seventh
most traded currency pair.

Trading volumes in euro/dollar, by far the world's
most traded pair, fell marginally, while dollar/yen jumped 19%.
(Reporting by Tommy Reggiori Wilkes; Editing by Olga Cotaga and
John Stonestreet)

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