Singapore overtook Japan as Asia’s biggest foreign-exchange center for the first time as trading surged in the past three years, the city-state’s central bank said, citing a survey by the Bank for International Settlements (BIS).
Singapore’s average daily foreign-exchange volume increased 44 percent to US$383 billion as of April from US$266 billion in the same month in 2010, the Monetary Authority of Singapore said in a statement on Thursday.
The average interest-rate derivatives volume climbed 6 percent to US$37 billion over the same period, the highest in the region after Japan, according to the statement.
“Singapore has definitely established itself as a hub for foreign-exchange trading,” Khoon Goh, a senior currency strategist at ANZ Banking Group Ltd in Singapore, said before the release of the statement. “Part of this emergence is due to the increasing importance of Asian currencies, and Singapore’s time zone is well-suited for that.”
The Chinese yuan entered the top 10 most-actively traded currencies, the BIS said. Singapore’s increase in ranking puts it behind only the UK and US in the US$6.67 trillion global foreign-exchange trading market, it said.
The city-state’s currencies trading expanded as the government offered incentives to boost its financial markets, which also led to a surge in the nation’s fund management industry, where more than 500 asset managers oversee about US$1.1 trillion.
“Our growing strength in foreign exchange is a key complement to the development of capital market and asset management activities,” Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore, said in the statement. “It will also better position our financial center to serve the investment and risk management needs of financial institutions and corporates throughout Asia.”
Foreign-exchange trading worldwide surged to an average US$5.3 trillion a day in April, boosted by greater yen volumes, the BIS said. Trading rose 33 percent from the same period in 2010, the BIS said, citing a survey of currency traders it runs every three years.
The yen had the biggest jump in trading activity among major currencies, while the euro’s role as the second-most traded currency was reduced.
The yuan was the ninth-most traded currency, up from 17th three years earlier, the BIS said.
“This is the beginning of what we can expect to be a very prominent trend,” Sacha Tihanyi, a senior currency strategist at Scotiabank in Hong Kong, wrote in an e-mailed note to clients yesterday.
The next survey will probably show a greater increase in yuan trading as a proportion of global turnover, Tihanyi said.
While trading increased in Singapore, its currency was ranked 15th, down three notches from 2010, according to the BIS. It was the seventh most-traded currency in 1998.
Foreign-exchange trading in Singapore is one-seventh the size of that in the UK and less than a third of the US total. The UK has 41 percent of the global market, followed by the US with 19 percent, said the BIS, which is the record-keeper of the world’s central banks. Singapore has a 5.7 percent share, followed by Japan’s 5.6 percent and Hong Kong’s 4.1 percent.
“Foreign-exchange market activity has become ever more concentrated in a handful of global financial centers,” the Basel, Switzerland-based BIS said in its report. “The vast majority of global FX trading in 2013 has occurred via the intermediation of dealers’ sales desks in five jurisdictions.”
While Japan’s share of foreign-exchange trading dropped, yen transactions jumped 63 percent between 2010 and this year, the biggest increase in activity among major currencies, according to BIS data.
Japanese Chief Cabinet Secretary Yoshihide Suga said the BIS report showed Tokyo’s financial markets are still growing and the acceleration of yen trading across the globe.