Forex, or foreign exchange, is the global market where currencies are traded. The forex market is the largest and most liquid financial market in the world, with daily trading volumes surpassing $5 trillion. This makes the forex market an attractive place for investors and traders looking to profit from currency fluctuations.
But just how much money is transferred on forex? To answer this question, we need to look at the different types of participants in the forex market and the volume of their transactions.
The first and largest group of participants in the forex market are commercial banks. Banks trade currencies to facilitate international trade and investment, to manage their own currency exposures, and to provide foreign exchange services to their clients. According to the Bank for International Settlements (BIS), the central bank for central banks, banks account for around 44% of daily forex turnover.
The second group of participants in the forex market are institutional investors, such as hedge funds, pension funds, and insurance companies. These investors trade currencies to diversify their portfolios, to hedge their currency risks, and to generate returns. According to the BIS, institutional investors account for around 16% of daily forex turnover.
The third group of participants in the forex market are retail traders, who trade currencies through online forex brokers. Retail traders are individuals who trade currencies for speculative purposes, hoping to profit from exchange rate movements. According to the BIS, retail traders account for around 5% of daily forex turnover.
The remaining 35% of daily forex turnover is made up of other participants, such as central banks, corporations, and governments.
So, how much money is transferred on forex each day? According to the BIS, the average daily turnover in the global forex market was $6.6 trillion in April 2019. This represents a 29% increase from the previous survey in April 2016, when the average daily turnover was $5.1 trillion.
To put this figure in perspective, the global stock market has a daily turnover of around $500 billion, while the global bond market has a daily turnover of around $700 billion.
The high volume of transactions in the forex market is driven by several factors. Firstly, the forex market is open 24 hours a day, five days a week, which means that traders can buy and sell currencies at any time. Secondly, the forex market is highly liquid, which means that there are always buyers and sellers for any currency pair. Thirdly, the forex market is global, which means that currencies can be traded across different time zones and jurisdictions.
In conclusion, the forex market is the largest and most liquid financial market in the world, with daily turnover exceeding $6.6 trillion. This high volume of transactions is driven by a variety of participants, including commercial banks, institutional investors, retail traders, and other entities. The forex market’s size and liquidity make it an attractive place for investors and traders looking to profit from currency fluctuations.
