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April 19, 2005 at 08:00 PM
GREENWICH, Conn. (HedgeWorld.com)–A new report attributes much of the 25% volume growth in foreign exchange in 2004 to a new class of “professional” investors that are predominately hedge funds.
Active trading strategies employed by hedge funds and active traders looking to capitalize on high levels of market volatility have transformed the currency market, Greenwich Associates found in its review of global FX trading trends and volumes.
“The changes that are occurring in the global FX have been so profound that the market has begun to evolve from its origin as a by-product of international trade and international capital markets transactions to an asset class in itself,” said Woody Canaday, a Greenwich consultant, in a statement.
The trend is evident in considering the number of electronic trading platforms that have sprung up in the past year, many gearing their services to the hedge fund community.
It’s estimated that daily FX volumes surpass $2.5 trillion.
Hedge funds, like other new FX traders, were attracted to last year’s U.S. dollar volatility and the price volatility in commodities that are priced in dollars. According to another Greenwich consultant, Frank Feenstra, such trends produced a “currency volatility bonanza for hedge funds.”
