Forex Blog

In April this year, 54 central banks and monetary authorities participated in the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity. They collected data on turnover in traditional foreign exchange markets – those for spot transactions, outright forwards and foreign exchange swaps – and in over-the-counter (OTC) currency and interest rate derivatives. This was the seventh global survey since April 1989 of foreign exchange market activity and the fifth survey since April 1995 additionally covering OTC derivatives market activity. Today participating central banks and monetary authorities are publishing their national survey results and the BIS is releasing preliminary global statistics from the survey. The two global headline figures from the April 2007 survey are the following:

Turnover in traditional foreign exchange instruments increased by an unprecedented 71% to $3.2 trillion. Although this was broad-based across instruments, growth in FX swap turnover was particularly strong, up by 82% in April 2007. Reporting dealers’ foreign exchange market turnover with both other financial institutions and non-financial customers more than doubled. As a consequence, the share of transactions between reporting dealers and other financial institutions, which mainly comprise hedge funds, mutual funds, pension funds and insurance companies, increased by 7 percentage points to 40%.

Activity in OTC derivatives markets continued to expand at a rapid pace. Average daily turnover of interest rate and non-traditional foreign exchange contracts increased by 71% to $2.1 trillion in April 2007. Turnover of foreign exchange options and cross-currency swaps more than doubled to $0.3 trillion per day, thus outpacing the above-mentioned growth in “traditional” instruments such as spot trades, forwards or plain FX swaps. Less brisk growth was recorded in the much larger interest rate segment, where average daily turnover increased by 64% to $1.7 trillion.

More detailed results on developments in the foreign exchange and OTC derivatives markets and comprehensive explanatory notes describing the coverage of and terms used to present the statistics are included in the separate statistical release of the data. Explanatory notes follow statistical tables.

The BIS plans to publish, in November 2007, the preliminary global results of the second part of the triennial survey covering open contracts outstanding in OTC derivatives markets at end-June 2007. A more detailed analysis of the results for the traditional foreign exchange markets will be published in the December 2007 BIS Quarterly Review. The final global results of both parts of the 2007 triennial survey are expected to be released in December 2007.

Sources: http://www.bis.org/

The Bank of England, or BoE, should consider immediate publication of a record of the votes of each policy maker after the interest rate decision is announced, the Treasury Committee of the House of Commons said in a report Tuesday.

In the report titled “The Monetary Policy Committee of the Bank of England: ten years on”, lawmakers said, “We recommend changes to enhance the transparency of the MPC, including immediate publication of a record of the votes of each MPC member after MPC decisions are released, greater transparency of individual MPC members’ positions in the minutes of the MPC, and further work on improving the public’s understanding of monetary policy.”

Currently, the vote of the BoE’s nine-member strong Monetary Policy Committee is revealed in the minutes of the session that is released two weeks after the announcement of the decision.

Lawmakers felt that immediate transparency of MPC voting would allow financial markets to assess the strength of the support within the MPC for any given decision. Additionally, the Committee recommends that the central bank should immediately indicate the individual views of the MPC members after the decision.

The Committee expressed concern that at “the lack of understanding of monetary policy by the general public, especially given this potential for a less benign economic environment ahead”. “It is important that if there are more uncertain times ahead, the public must understand and support the reasons behind movements in interest rates”, the report said.

While extending strong support to the symmetry of the inflation target, the Committee asserted that it would watch out for any signs that “there appears to be either anti- or pro-inflationary bias by the Monetary Policy Committee”. The report added that lawmakers would seek explanation for such signs during regular hearings on Inflation Reports.

UK’s official inflation target is 2%. Latest data from the Office for National Statistics showed that annual inflation stood at 1.9% in July, much below the 2.4% witnessed in the previous month. The rate came in below the official target for the first time since March 2006.