Investors are gradually returning to the currency markets following a rout in March when the spread of the new coronavirus sent most units tumbling against the dollar, a group of market data providers found.
Liquidity in the foreign exchange markets is coming back towards pre-COVID-19 levels for some of the major currencies, with most recording on average about 70% to 80% of their previous daily volumes, Mosaic Smart Data, CLS and MUFG found in a collaborative project.
Trading volumes in emerging market currencies "are not faring as well", however, and remain at about 45% of pre-crisis levels, while outside of market hours trading generally remains very thin, the group found.
Euro/dollar - the most traded currency pair in the $6.6 trillion a day market - has seen market liquidity return to nearly 80% of its pre-crisis level.
Liquidity in dollar/Japanese yen was largely shielded from disruption throughout the crisis. Both units have remained appealing as safe-haven currencies during the pandemic, with money managers shifting assets from riskier markets to more stable ones.
Liquidity in euro/Swiss franc - another widely traded pair during market stress - was at 85% of pre-crisis levels, making it the most used currency pair among the G10 right now.
Within the sterling/dollar pair, analysts noticed "an immediate and sharp spike" in liquidity after the London fixing hours, marking a change in traders' behaviour relative to pre-COVID-19 market conditions, they said.
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