LONDON, May 17 (Reuters) - Global currency trading volumes rose to just shy of $5 trillion a day in April as volatility picked up after the Bank of Japan surprised many by keeping monetary policy unchanged, data from settlement company CLS showed on Tuesday.
Instructions to CLS account for more than 90 percent of the world’s single biggest financial market. They showed volumes rose to $4.96 trillion a day in April, up from $4.69 trillion in March and $4.64 trillion in April 2015.
The April volumes will be highlighted in the Bank of International Settlement’s triennial survey of the foreign exchange market and which will be released in September. The triennial survey is the most comprehensive one undertaken and activity in April will give a guage of the market size.
Trends in the currency options market show that the cost of hedging against sharp currency swings rose sharply in April after the BOJ meeting in early April. The BOJ’s steady stance along with a decline in overall risk sentiment in global markets drove many speculators and investors to cut favourable dollar positions and buy the safe-haven yen.
That saw overall volatility in currency markets climb , before easing back again towards the end of the month . Higher volatility shores up volumes in currency markets, boding well for banks and traders who thrive on sharp moves to make money.
Nevertheless, volumes in the foreign exchange market, a success story for banks over the past decade, have faded from peaks hit around the start of last year as lenders cut back on their own trading and the leverage they give fund clients to play with.
Volumes have been below $5 trillion a day for most of the past year and spot volumes on currency trading platforms run by Thomson Reuters and ICAP fell in April. (Reporting by Anirban Nag; Editing by Alison Williams)