Dollar drama
Global turmoil has at least one beneficiary: currency traders
The foreign-exchange market has been reinvigorated by recent events
Traders often joke that FX stands for “forgotten exchange”.
After the global financial crisis of 2007-09, near-zero interest rates in rich economies and tighter currency management in emerging ones kept volatility low—and with it, profits.
Now Donald Trump’s return to the White House has jolted currency markets back to life.
In April a measure of the volatility of the DXY index, which compares the dollar with a basket of peer currencies, was almost twice as high as a year earlier.
CME Group, the world’s largest derivatives exchange, says that in the first quarter of 2025—before Mr Trump’s “Liberation Day” tariff shock—foreign-exchange trading volumes on its platforms were up by 25% year on year, with a record daily average of 1.1m futures and options contracts traded.
On April 3rd, the day after Mr Trump’s announcement, trading on EBS, a CME spot foreign-exchange platform, reached $147bn, the most since 2020.
Other policy surprises have had similar consequences.
On March 5th trading between the euro and the dollar hit $137bn, more than double this year’s daily average, after Germany announced more defence spending.
On May 2nd trading in one-month forward contracts on the dollar-Taiwan dollar exchange rate reached over $6bn on EBS, a record for a single day, after China signalled openness to trade talks with America.
Stockmarket jitters have added to the turbulence, with the dollar weakening since mid-January as investors pulled money from American shares.
Currencies are quick to respond to unexpected developments, says Paul Lambert of NCFX, a data provider.
The $7.5trn-a-day market is highly liquid, runs around the clock and settles fast, allowing investors to respond at once to news outside normal trading hours.
They then shift exposures in stocks or bonds once markets open.
Mr Trump’s announcements late in the American day often land during Asia’s morning, triggering a rush of trading in the region, notes John Rothstein of Optiver.
To keep up, his trading firm has had to expand its operations in Singapore.
Much of the pickup in activity comes from companies and investors trying to limit currency risk, says Mr Lambert.
Multinationals hedge foreign revenues and costs; investors want to protect overseas holdings.
Lauren van Biljon of Allspring Global Investments, an asset manager, says that her clients increasingly view currency moves as a source of returns, too.
Recent results issued by big banks on both sides of the Atlantic suggest that they are also benefiting from the turbulence.
UBS announced that revenue from its foreign-exchange, rates and credit division had jumped by 27% year-on year during the first quarter, driven largely by strong performance in currencies.
Goldman Sachs reported a more modest rise of 2% in fixed-income, currency and commodity trading, but also credited higher revenues from currencies.
“When markets turn volatile, clients want to speak to a real person,” says Stephen Jefferies of JPMorgan Chase (even if his firm is keeping headcount steady for now).
A return to foreign-exchange trading’s heyday is still a little while off, but in a more fractured world, he predicts, currency volatility is likely to last.
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