Educational

Written by Research | 19 May 2012

The degree of trading difficulty for the foreign currency market has increased so much for the past decade as compared to the decrease in trading volume as reported by the Bank for International Settlements; due to the tremendous amount of information / trading activity absorbed by the market.

The past couple of years alone have transformed into a TUG of WAR between Domestic & International Politics, Policies of Rules & Regulations, Investor’s concern of the financial instability in both continents and the global growth of the emerging economies of other developing countries.

The timeless pressure of the financial markets have been building within the financial system from both sides of the continent have somehow been re-tested for its stability time and again. The process of trade and Investments made by institutional players, hedge funds and major portfolio managers have differentiated the trading landscape from commodities to stocks and of course not to mention the degree of trading activity of the foreign Exchange market.

The Foreign-exchange trading volumes fell sharply toward the end of 2011 as the euro zone's sovereign-debt crisis flared up and European banks cut back lending world-wide, the Bank for International Settlements said in its quarterly report.

Non-European banks and emerging-market bond issuers stepped in to fill funding gaps as European lenders retrenched from global markets in the final part of the year in 2011, the BIS report stated. Nonetheless, the daily turn-over in the global foreign-exchange markets have reached over $4.7 trillion on the average in October 2011. And the volumes likely dropped sharply lower towards the end of the year in 2011 and into the start of 2012. And this is due to the hard-hit markets through 2011 by the euro zone's debt crisis, down-grades, sovereign wealth funds and the US sluggish economic recovery where volatility and lack of investment interest has kept investors on the sidelines. Figures from a range of trading centers show volumes during October fell for the first time since 2009, when markets were recovering from the collapse of U.S. investment bank Lehman Brothers. Thereafter, as prices rippled through much of the market has affected trading activities couple with the negative sentiment have played overwhelmingly with international investors and even spill-over to main street investors.

The last time the BIS measured daily foreign-exchange trading volumes was in April 2010, in its triennial report. At that time it estimated daily turnover at $4 trillion. The Basel, Switzerland-based BIS describes itself as a banker to central banks,serving as a counterparty for central bank transactions and conducting research.

 FYI : INFORMATION SHARING FOR TRADERS: CASE STUDY REFERENCE