Table 1: fx turnover and growth: Comparison with trade, gdp and equity trading volume

	1992	1995	1998	2001	2004	2007	2010
a) Volumes
All instruments	857	1135	1713	1480	2013	3296	3981
Spot total	434	475	637	461	657	996	1490
Forwards total	65	93	143	156	217	359	475
Growth, spot and forwards		44%	54%	9%	40%	65%	32%
b) Ratios
Spot/Trade	31	29	30	18	21	23	36
Spot/GDP	10	10	11	7	10	12	16
Spot/Equity volume	35	25	14	4	9	7	9

Note: Panel a) Constant 2010-values, in billions USD, for volumes based on BIS Triennial FX surveys corrected for inter-dealer and cross-border double-countin Panel b) Ratio of spot volumes to trade volumes (import and exports), GDP and equity volumes of 35 countries. The aggregate spot volume are created based on the currencies of the same 35 countries (EUR for the EU-countries after 1999).

Physically, FX trading remains heavily concentrated in London, which captures over one-third of global trading, and New York, which captures almost one-fifth of trading (Table 2). London’s traditional dominance in FX grew out of the United Kingdom’s worldwide economic dominance in the nineteenth century. It remains secure at the beginning of the twenty-first century because of its geographic location: London’s morning session overlaps with Asian trading and its afternoon session overlaps with New York trading. Trading in the Asia-Pacific region, which in aggregate accounts for about one quarter of global trading, is dispersed among Tokyo, Hong Kong, Singapore, and Sydney. Latin America, Africa, and the Middle East each account for less than 1 percent of global turnover.

Despite the continued dominance of London and New York, there have been some subtle shifts in the global distribution of currency trading. The advent of the euro brought a decline in the share of European trading outside of London. Meanwhile, rapid economic growth in Asia has supported a surge in trading in the Asian regional centres. Hong Kong and Singapore now vie in importance with traditional European centres such as Switzerland and France.

Table 2: Geographical distribution of global foreign exchange market turnover (%)

Currencies thatare traded

Another unchanging aspect of the FX markets is the dominance of the U.S. dollar (USD), which is still involved on one side of roughly three-quarters of all spot transactions (Table 3). The dollar’s dominance reflects the market’s practice of trading minor currencies via a major currency (called the vehicle currency). A trade from Mexican pesos (MXP) to Australian dollars (AUD), for example, would typically involve two trades, one from MXP to USD and a second from USD to AUD. This “vehicle” trading through the major crosses concentrates liquidity in a narrower range of currency pairs, reducing overall transaction costs. The euro (EUR) is involved in 46 percent of trades, in part because it serves as the vehicle currency within the eurozone.

The next most actively traded currencies are the Japanese yen (JPY, 20 percent) and the UK pound (GBP, 14 percent). Together, these four currencies are known as “the majors” (or G4)