Average daily foreign exchange trading volumes dropped 8.3 percent in April from a year earlier, settlement firm CLS said on Thursday, as falling volatility in currency markets deterred investors from trading. Price fluctuations in the $5.1 trillion-a-day FX market last month fell to their lowest levels since 2014 as the world's biggest central banks moved in tandem to halt monetary tightening, suppressing volatility. Bigger price moves usually encourage investors and companies to trade currencies more.
CLS, a major settler of trades in the foreign exchange market, said in a statement that April's volumes fell to $1.629 trillion from $1.777 trillion a year earlier. Last month's volumes were also down 12.5 percent from the $1.86 trillion notched up in March.
Currency trading platforms are experiencing slower trading volumes so far in 2019. CLS said spot, swap and forward trading volumes were all down in April from March levels and from a year earlier. Refinitiv, which runs another large forex platform and is yet to report its April numbers, has reported a small decline in volumes between January and March of this year versus 2018.
A strong rally in equity markets as investors snapped up riskier assets, the dovish shift by large central banks and a lack of major political surprises have all served to push currency pairs into tight trading ranges. Bank traders report slowing trading activity as investors sit on the sidelines and corporates cut back on their hedging strategies.
Even sterling, a currency that for months has swung wildly on Brexit-related headlines, has turned more stable after Britain postponed its exit date from the European Union until the end of October. The Deutsche Bank Currency Volatility Index hit a near four-year low in April, although it has risen this month as the threat of a breakdown in trade talks between the United States and China rattled investor confidence.
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