ingcentres tended to exist in isolation.The early twentieth century saw the end of the Gold Standard.
2.5 THE BRETTON WOODS SYSTEMConvertibility ended with the Great Depression, and the major powers left the Gold Standardand fostered protectionism. As the political climate deteriorated and the world headed forwar, the foreign exchange markets all but ceased to exist. With the end of World War II,reconstruction for Europe and the Far East had as its base the Bretton Woods system.In 1944 the Bretton Woods agreement devised a system of convertible currencies,ﬁxed rates and free trade.In 1944, the post-war system of international monetary exchange was established at BrettonWoods in New Hampshire, USA. The intent was to create a gold-based value of the Americandollar and the British pound and link other major currencies to the dollar. This system allowedfor small ﬂuctuations in a 1% band.
2.6 THE INTERNATIONAL MONETARY FUNDAND THE WORLD BANKThe conference, in fact, rejected a suggestion by Keynes for a new world reserve currencyin favour of a system built on the dollar. To help to accomplish its objectives, the BrettonWoods conference instigated the creation of the International Monetary Fund (IMF) and theWorld Bank. The function of the IMF was to lend foreign currency to members who requiredassistance, funded by each member according to size and resources. Gold was pegged at $35an ounce. Other currencies were pegged to the dollar and under this system, inﬂation wouldbe precluded among the member nations.In the years following the Bretton Woods agreement, recovery was soon evident, tradeexpanded and foreign exchange dealings, while primitive by today’s standards, returned. Whilethe amount of gold held in the American central reserves remained constant, the supply of
10
A Foreign Exchange Primer
dollar currency grew. In fact, the increased supply of dollars in Europe funded the post-warreconstruction of Europe in the 1950s. It seemed that the Bretton Woods accord had achievedits purpose. However, events in the 1960s once again bought turmoil to the currency marketsand threatened to unravel the agreement.
2.7 THE DOLLAR RULES OKBy 1960, the dollar was supreme and the American economy was thought to be immune toadverse international developments, and the growing balance of payments deﬁcits in Americadid not appear to alarm the authorities. The ﬁrst cracks started to appear in November 1967.The British pound was devalued as a result of high inﬂation, low productivity and a worsening balance of payments. Not even massive selling by the Bank of England could avertthe inevitable. President Johnson was trying to ﬁnance ‘the great society’ and ﬁght theVietnam War at the same time. This caused a drain on the gold reserves and led to capitalcontrols.In 1967, succumbing to the pressure of the diverging economic policies of the members ofthe IMF, Britain devalued the pound from $2.80 to $2.40. This not only increased demand forthe dollar but it also increased the pressure on the dollar price of gold, which remained at $35an ounce. Under this system free market forces were unable to ﬁnd an equilibrium value.
2.8 SPECIAL DRAWING RIGHTSBy now markets were becoming increasingly unstable, reﬂecting confused economic andpolitical concerns. In May 1968, France underwent severe civil disorder and had some ofthe worst street rioting in recent history. In 1969, France unilaterally devalued the franc andGermany was obliged to revalue the Deutschemark, resulting in a two-tier system of goldconvertibility. Central banks agreed to trade gold at $35 an ounce with each other and notintercede in the open marketplace where normal pressures of supply and demand would dictatethe prices.
In 1968 the IMF created Special Drawing Rights (SDRs), which made internationalforeign exchange possible.In 1969, SDRs were approved as a form of reserve that central banks could exchangeas a surrogate for gold.As an artiﬁcial asset kept on the books of the IMF, SDRs were to be used as a surrogate forreal gold reserves. Although the word ‘asset’ was not used, it was in fact an attempt by theIMF to create an additional form of paper gold to be traded between central banks. Later, theSDR was deﬁned as a basket of currencies, although the composition of that basket has beenchanged several times since then.
During 1971 the Bretton Woods agreement was dissolved.
A Brief History of the Market
11
2.9 A DOLLAR PROBLEMAs the American balance of payments worsened, money continued to ﬂow into Germany.In April 1971, the German Central Bank intervened to buy dollars and sell Deutschemarksto support the ﬂagging dollar. In the following weeks, despite massive action, market forcesoverwhelmed the central bank and the Deutschemark was allowed to revalue upwards againstthe dollar. In May 1971, Germany revalued again and other currencies quickly followed.The collapse of the Bretton Woods system ﬁnally occurred when the American authoritiesacknowledged that there was a ‘dollar’ problem. President Nixon closed ‘the gold window’ on15 August 1971, thereby ending dollar convertibility into gold. He also declared a tax on allimports for a short period, but signalled to the market that a devaluation of the dollar versusthe major European currencies and the Japanese yen was due.2.9.1 The Smithsonian agreementA ﬁnal attempt was made to repair the Bretton Woods agreement during late 1971 at a meetingat the Smithsonian Institute. The result was aptly known as the Smithsonian agreement. Awidening of the ofﬁcial intervention bands for currency values of the Bretton Woods agreementfrom 1% to 2.25% was imposed, as well as a realignment of values and an increase in the ofﬁcialprice of gold to $38 per ounce.2.9.2 The snakeWith the Smithsonian agreement the dollar was devalued. Despite the fanfare surroundingthe new agreement, Germany nevertheless acted to impose its own controls to keep theDeutschemark down. In concert with its Common Market colleagues, Germany fostered thecreation of the ﬁrst European Monetary system, known as the ‘snake’.This system referred to the narrow ﬂuctuation of the EEC currencies bound by the widerband of the non-EEC currencies. This short-lived system began in April 1972, but even thismechanism was not the panacea all had hoped for, and Britain left the snake, having spentmillions in support of the pound.2.9.3 The dirty ﬂoatDuring this period the dollar was still under pressure as money ﬂowed into Germany, the rest ofEurope and Japan. The ﬁnal straw was the imposition of restrictions by the Italian governmentto support the Italian lira. This ultimately caused the demise of the Smithsonian agreementand led to a 10% devaluation of the dollar in February 1973. Currencies now ﬂoated freely,with occasional central bank intervention. This was the era of the ‘dirty ﬂoat’, and 1973 and1974 saw a change in the dollar’s fortunes. The four-fold increase in oil prices following theYom Kippur War, in the Middle East, created a tremendous demand for dollars, and, since oilwas priced in dollars the currency soared. Those who were accustomed to selling dollars wereseverely tried. The collapse of the Herstatt and Franklin banks followed as a direct result ofthis shift in the dollar’s fortunes. The dollar was again under pressure during the mid-1970s,reﬂecting still worsening balance of payments ﬁgures. Treasury secretary Michael Blumenthal,in trying to foster export growth, constantly talked the dollar down, and Europe and Japan wereglad to see a lower dollar, since their oil payments were correspondingly cheaper.
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A Foreign Exchange Primer
2.10 THE EMS AND THE ERMThe European Monetary System (EMS) and the European Rate Mechanism (ERM) wereestablished in 1979.2.10.1 The European Monetary SystemIn the EMS, member currencies were permitted to move within broad limits against each otherand a central point. The EMS represented a further attempt at European economic coordination,and a grid was established, linking the value of each currency to the others. This attempt to ‘ﬁx’exchange rates met with near extinction during 1992–1993, when built-up economic pressuresforced the devaluations of a number of weak European currencies.The maximum permitted divergence from the EEC band of currency ﬂuctuations was:
r 2.25% among strong currencies within the EEC;r 6.00% among weak currencies within the EEC;r Unlimited with other countries and the dollar.Divergence beyond these boundaries required the central banks of each country to intervenein the foreign exchange markets, selling the strong currency and buying the weak to maintaintheir relative values.2.10.2 The Exchange Rate MechanismIn 1979, central banks agreed to another tool to intervene in the market. This was known asthe Exchange Rate Mechanism (ERM), and allowed changes in short-term interest rates thuspunishing speculators by raising rates in the weaker currencies to discourage short selling.Currencies participating in the ERM were:
r Austrian schillingr Belgium francr Danish kroner German Markr French francr Portuguese escudor Spanish pesetar Dutch guilderr Irish punt2.11 THE EUROPEAN CURRENCY UNITThe European Currency Unit (ECU) was also introduced as a forerunner to creating a singleEuropean currency. The ECU was a currency based on the weighted average of the currenciesof the common market. The ECU also served to provide a measure of relative value for eachcurrency in the EMS.An active market in ECU-denominated bonds developed, as well as a liquid spot andforward ECU foreign exchange market. The primary activity in these markets was to supplyliquidity through speculative trading and arbitrage of the component elements of the ECU. All
A Brief History of the Market
13
such trading activity served to stabilize the currency and interest markets and was, therefore,valuable.Throughout the 1980s, the EMS suffered occasional periods of stress in the system, withspeculative runs on the weak currencies of the system resulting in frequent realignments. TheGerman Bundesbank’s conservative anti-inﬂationary policies were out of step with the moreinﬂation-prone, loose money policies of Italy, France, Spain, Portugal and the Scandinaviancountries. Devaluation of those currencies versus the Deutschemark was often associatedwith large speculative positions, which were taken by banks, hedge funds and other marketparticipants, almost always at the expense of currency holders of the weaker countries.
2.12 THE MAASTRICHT TREATYThe quest for currency stability in Europe continued with the signing of the Maastricht treatyin 1991. This treaty proposed that a single European Central Bank be established, much as theFederal Reserve that was established in 1913 to act on behalf of American interests. Afterthe European currencies were ﬁxed, they were moved into a single currency, which has led tothe actual replacement of many European currencies with the euro.
2.13 THE TREATY OF ROMEThe euro has actually been an ambition since 1958 and the Treaty of Rome, with a declarationof a common European market as a European objective with the aim of increasing economicprosperity and contributing to ‘an ever closer union among the people of Europe’. The SingleEuropean Act and the Treaty on European Union have built on this, introducing Economic andMonetary Union (EMU) and laying the foundations for a single currency.In 1991 the European Council approved the Treaty of the European Union. Fifteencountries signed for the European currency – the euro.In 1992, the EMS came under the most intense pressure in its short history. In September,Britain was forced out of the ERM after less than two years as a member. Germany’s tightmonetary policy proved incompatible with most of the other members of the EMS, leading todevaluations or total departures from the system.From the summer of 1992 to 1993, speculators proved many times that the market in foreignexchange was far more potent a force in driving exchange rates than central banks. One ofthe most famous examples of speculation driving economic policy occurred when GeorgeSoros was reputed to have earned $1 billion selling British pounds and buying dollars andDeutschemarks by ‘betting’ against the ability of the central banks to withstand market forces.In August 1993, the ERM intervention points were widened to 15% for most currencies –an admission by the central banks to the markets of their inability to dictate exchange rates.Speculators made fortunes in foreign exchange trading, betting against the central banks’capacity to manage foreign exchange rates in contradiction of the divergent economies andpolicies of the EMS members.Periods of volatility are always associated with speculation, as the market attempts to ﬁndan equilibrium value for each currency that reﬂects all of the information in the marketplace.It is, in fact, the speculators that provide most of the capital in efforts to revalue or devalue a
14
A Foreign Exchange Primer
currency, rather than central banks’ current reserves. For example, when the dollar reached itsall-time low against the yen in 1995, the resulting loss of competitiveness of Japanese productsglobally caused a severe recession in Japan, leading to several bank failures, a real estate selloff globally, and drastic changes in economic and interest rate policies.
2.14 ECONOMIC REFORMSimilarly, in early 1998 the strength in the yen against all the major currencies was associatedwith high volatility and much speculative activity. The marketplace reacted to the politicalpressure imposed by America in attempting to reduce the trade imbalance between Americaand Japan by strengthening the yen. With the American Federal Reserve Bank intervening in148
146JPY-USD
144
142
140
138
136
134
132
130
12813/04/98
27/04/98
11/05/98
25/05/98
08/06/98
22/06/98
06/07/98
20/07/98
03/08/98
Figure 2.1 US Federal intervention on the dollar in 1998. Reproduced by permission ofStandard & Poor’sSource: MMS
A Brief History of the Market
15
the foreign exchange market to sell dollars and buy yen (Figure 2.1), coupled with treats ofa trade war and import tariffs, the yen was signiﬁcantly revalued upwards. However, in thesecond half of 1998, the ﬁnancial crisis in Asia, coupled with the opinion that the yen wasseverely overvalued, caused the yen to tumble against the dollar and other major currencies.Speculation in the marketplace, once again, had caused economic reform.
2.15 A COMMON MONETARY POLICYThe next stage of EMU began on 1 January 1999, when the exchange rates of the participatingcurrencies were irrevocably set. Euro area member states began implementing a common monetary policy and the euro was introduced as legal tender. The 11 currencies of the participatingmember states became subdivisions of the euro with Greece becoming the twelfth member on1 January 2001.The composition of the European Central Bank occurred in 1998. Eleven countriessign for the euro: Austria, Belgium, Finland, France, Germany, Ireland, Italy,Luxembourg, Netherlands, Portugal and Spain. January 1999 was the conversionweekend. The equity markets of 11 European nations have been united into onemonetary unit – the euro.On 1 January 2001, Greece became the twelfth country to join the European Union.
2.16 THE SINGLE CURRENCYIn January 2002 the euro currency became the legal tender in all 12 participatingcountries.In January 2002, euro notes and coins were actually being circulated in the different countriesand by the end of the ﬁrst quarter, national notes and coins no longer existed. This changehad an impact on everyone, from manufacturers, importers and exporters with trade ﬂows tohedge, central banks with reserve asset and debt management concerns, to ﬁnancial institutionsand pension funds with international portfolios. In fact, even though this event was speciﬁc toEurope, the impact affected the world’s currency markets from America to Japan. The singlecurrency in Europe formed one corner of the new triangular world of the dollar, the yen, andthe euro.The conversion of national legacy currencies meant that organizations had to have theability to accept both forms of transaction. It has been quite complicated because, for instance,to convert sterling to francs you had to have a conversion via the euro. This is because thenational legacy currency no longer existed in its own right but was a denomination of the euro,ﬁxed by the conversion rate. These legacy rates are shown in Table 2.1.The European currencies have always ﬂuctuated against the dollar, even as the debate aboutthe euro has raged, and this can be shown in the following.
r Birth of European Monetary System. The economic crisis of the 1970s led to the ﬁrst plans fora single currency, and the system of ﬁxed exchange rates pegged to the dollar was abandoned.
16
A Foreign Exchange PrimerTable 2.1 The ﬁxing rates: legacy currencies ratesagainst the euroAustrian schillingBelgian francFinnish markFrench francGerman MarkGreek drachmaIrish puntItalian liraLuxembourg francDutch guilderPortuguese escudoSpanish peseta
ATSBEFFIMFRFDEMGRDIEPITLLUFNLGPTEESP
13.760340.33995.945736.559571.95583340.750.7875641936.2740.33992.20371200.482166.386
European leaders agreed to create a ‘currency snake’, tying European currencies together.However, the system immediately came under pressure from the dollar, causing problemsfor some of the weaker European currencies.r Plaza Accord. During the 1980s, the dollar-strengthened dramatically. American interestrates were high, which was caused by a dispute between the Reagan administration and theAmerican Federal Reserve Bank over the size of the budget deﬁcit. In 1986, the world’sleading industrial countries agreed to act and lower the value of the dollar. A successful dealwas struck at New York’s Plaza hotel.r Kuwait crisis. On 2 August 1990 Iraq invaded Kuwait. On the same day the UN SecurityCouncil passed a resolution condemning the invasion. The position of the Swiss franc againstthe dollar during 1990/1991 is shown in Figure 2.2.r Maastricht treaty. In 1991, the 15 members of the European Union, meeting in the Dutchtown of Maastricht, agreed to set up a single currency as part of a drive towards economicand monetary union. There were strict criteria for joining, including targets for inﬂation,interest rates and budget deﬁcits. A European central bank was established to set interestrates. Britain and Denmark, however, opted out of these plans.r ERM crisis. The exchange rate mechanism, established in 1979, was used to keep the valueof European currencies stable. However, fears that voters might reject the Maastricht treatyled currency speculators to target the weaker currencies. In September 1992, Britain anda few of the other EU countries were forced to devalue, and only the French franc wassuccessfully defended against the speculators.r Asian crisis. The turbulence in the Asian currency markets began in July 1997 in Thailandand quickly spread throughout the Asian economies, eventually reaching Russia and Brazil.Foreign lenders withdrew their funds amid fears of a global ﬁnancial meltdown and thedollar strengthened. Many EU countries were struggling to cut their budget deﬁcits to meetthe criteria for euro membership.r Euro launch. The euro was launched on 1 January 1999 as an electronic currency usedby banks, foreign exchange dealers and stock markets. The new European Central Bankset interest rates across the eurozone. However, uncertainly about its policy and publicdisagreements among member governments weakened the value of the euro on the foreignexchange markets.
A Brief History of the Market
17
1.6
1.55CHF-USD
1.5
1.45
1.4
1.35
1.3
1.25
1.202/07/1990
02/10/1990
02/01/1991
02/04/1991
02/07/1991
Figure 2.2 Dollar vs Swiss franc during the Kuwaiti invasion. Reproduced by permission ofStandard & Poor’sSource: MMS
r Central bank intervention. After just 20 months, the euro had lost nearly 30% in value againstthe dollar. The European Central Bank and other central banks ﬁnally joined forces to boostits value. This move helped to put a ﬂoor under the euro, but it did not recover its value. Aweak euro helped European exports, but it also undermined the credibility of the currencyand fuelled inﬂationary pressures.r Terrorist attacks on New York and Washington. The attack in New York severely tested thecurrency markets. Money ﬂowed out of the dollar into safe havens, such as the Swiss francand, for the ﬁrst time, the euro. The central banks tried to calm the markets and interest rateswere cut across the globe. Many observers believe it may have marked the coming of age ofthe euro as an international currency.r Euro became cash currency. On 1 January 2002, the euro became a reality for approximately300 million citizens of the 12 countries in the Eurozone. The arrival of the euro as a cashcurrency may foster closer integration and greater price competition within the Eurozone.It may, also, help to boost its international role, as the doubts grow over the strength of thedollar, especially as the American economy continues to slow.
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A Foreign Exchange Primer
CONCLUDING REMARKSOver the past 30 years or so, nations in the West have variously experienced currency devaluations, revaluations, the abandonment of the dollar–gold convertibility, oil crises, crises ofconﬁdence, exchange controls, snakes in tunnels, basket currencies, recycling pressure and thesubsequent Third World debtor nations’ crisis. However, on the whole, we now live in a worldof freely ﬂoating exchange rates. There is a far better understanding of monetary economics onthe part of the world’s governments, much reduced dependence on artiﬁcial trade barriers orexchange controls and a freedom and speed of international communication, which creates asingle global foreign exchange market.It will be difﬁcult to predict how the foreign exchange markets will perform in the next fewyears, but two points are certain:
r London will remain the largest foreign exchange centre, outperforming New York and Tokyoin volume.
r Risk management will continue to be a key issue for corporates, speculators and ﬁnancialinstitutions alike.
3Market Overview3.1 GLOBAL MARKETSimply deﬁned, foreign exchange is the buying of one currency and the selling of another,always achieved in pairs. For example, the European euro against the American dollar(EUR/USD) or the dollar against the Japanese yen (USD/JPY). It is a global, over-the-countermarket, which is unregulated and is in operation 24 hours a day, seven days a week. There aredealing centres in all the major capitals of the free world, from sunrise in Sydney, Tokyo andthe rest of the Far East ﬁnancial centres, through daytime trading activities in London and theEuropean centres, across the Atlantic to New York and Chicago and on westwards to sunsetin Los Angeles and Hawaii.Individual buyers and sellers will generally deal verbally over the telephone, or act throughbrokers, or electronically. This means that rates change from dealer to dealer rather than beingcontrolled by a central market. For example, investors do not call various dealers for the bestprice on a speciﬁc stock as the price is quoted on the stock exchange, but they do call differentdealers to get the best exchange rate on a speciﬁc currency. They may also refer to variouswidely available bank/broker screens for indicative pricing (see Figure 3.1).
The foreign exchange market has an average daily turnover of approximately $1.6trillion and is the largest in the world.
3.2 NO PHYSICAL TRADING FLOORThe market is decentralized with no physical trading ﬂoor. However, there are two exceptionsto the lack of a physical marketplace. Firstly, foreign currency futures are traded on a fewregulated markets, theCurrency futures obligates its owner to purchase a speciﬁed asset at a speciﬁedexercise price on the contract maturity datebetter known of which are IMM in Chicago, SIMEX in Singapore and LIFFE in London.Secondly, there are daily ‘ﬁxings’ in some countries where major currency dealers meet to‘ﬁx’ the exchange rate of their local currency against currencies of their major trading partners, at a predetermined moment in the day. Immediately after the ﬁxing, the rates continueto ﬂuctuate and trade freely; for example, ﬁxing the dollar against the Israeli shekel. However, ﬁxings are occurring with less and less frequency and are simply becoming symbolicmeetings.
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A Foreign Exchange Primer
Figure 3.1 This example of a broker screen shows ‘live’ market prices for major currencies againstthe dollar (e.g. dollar against Swiss franc (USD/CHF)) and cross-currencies (e.g. British pound againstJapanese yen (GBP/JPY)). Reproduced by permission of IFX Markets Ltd
Source: IFX Markets
3.3 A ‘PERFECT’ MARKETBy dint of modern communications and information systems being dynamically available inall centres to all market participants, and the international applicability of the products traded,the foreign exchange market probably comes nearer than any of the global ﬁnancial marketsto being considered a ‘perfect’ market.
The foreign exchange market is a global network of buyers and sellers of currencies.
The United Kingdom is, in effect, the geographic centre, with America a distant second andJapan in third place. Approximately 84% of the world’s foreign exchange business is executedin these three major dealing centres. Of course, there are also many smaller centres in differentparts of the world – for example, Zurich, Frankfurt and Singapore. Perhaps the most importantreason for London being in such a prominent position is its location among disparate timezones. During the day, at one time or another, London markets are in contact with Europeanmarkets, several Asian and Middle East markets and major North American markets. Also,this leading position arises from the large volume of international business that is generated inLondon.
Market Overview
21
3.4 THE MAIN INSTRUMENTSThe main instruments for foreign exchange trading include both traditional products such asspot, forwards and swaps, and more exotic products such as currency options and currencyswaps. The beauty of the foreign exchange market is its ability to accommodate new products –for instance, currency options come in all shapes and sizes, and can be tailor-made to serveany speciﬁc purpose.The products used today are described as:
r Spot – A single outright transaction involving the exchange of two currencies at a rate agreedon the date of the contract for value or delivery (cash settlement) within two business days.
r Forward – A transaction involving the exchange of two currencies at a rate agreed on thedate of the contract for value or delivery at some time in the future (more than two businessdays).r Swap – A transaction which involves the actual exchange of two currencies (principle amountonly) on a speciﬁc date, at a rate agreed at the time of conclusion of the contract (the shortleg) and a reverse exchange of the same two currencies at a date further in the future, at arate agreed at the time of the contract (the long leg).r Currency swap – A contract that commits two counter parties to exchange streams ofinterest payments in different currencies for an agreed period of time, and to exchangeprinciple amounts in different currencies at a pre-agreed exchange rate at maturity.r Currency option – A contract, which gives the owner the right, but not the obligation, tobuy or sell a currency with another currency at a speciﬁc rate during a speciﬁc period.r Foreign exchange futures – This is a forward contract for standardized currency amountsand for standard value dates. Buyers and sellers of futures are required to post initial marginor security deposits for each contract and have to pay brokerage commissions.
3.5 THE DOLLAR’S ROLEApproximately 80% of foreign exchange transactions have a dollar leg, amounting to over$1 trillion per day. The dollar plays such a large role in the markets for the following reasons.1. It is used as an investment currency throughout the world.2. It is a reserve currency held by many central banks.3. It is a transaction currency in many international commodity markets.4. Monetary bodies use it as an intervention currency for operations in their own currencies.
3.6 WIDELY TRADED CURRENCY PAIRSThe most widely traded currency pairs are:
r the American dollar against the Japanese yen (USD/JPY);r the European euro against the American dollar (EUR/USD);r the British pound against the American dollar (GBP/USD); andr the American dollar against the Swiss franc (USD/CHF).In general, EUR/USD is by far the most traded currency pair and has captured approximately30% of the global turnover. It is followed by USD/JPY with 20% and GBP/USD with 11%(see Tables 3.1 and 3.2). Of course, most national currencies are represented in the foreign
Table 3.1 Global foreign exchange market turnover1 (Daily averagesin April, in billions of US dollars)Instrument
1989
1992
1995
19982
2001
Spot transactionsOutright forwardsForeign exchange swapsEstimated gaps in reportingTotal ‘traditional’ turnoverMemorandum item:Turnover at April 2001exchange rates3
3172719056590
3945832444820
49497546531190
568128734601490
387131656361210
570
750
990
1400
1210
1 Adjusted for local and cross-border double-counting.2 Revised.3 Non-US dollar legs of foreign currency transactions were converted into original currency amounts at averageexchange rates for April of each survey year and then reconverted into US dollar amounts at average April 2001exchange rates.Source: Bank for International Settlement – Central bank survey of foreign exchange and derivatives market activityApril 2001: preliminary global data.Reproduced by permission of the Bank for International Settlement
Table 3.2 Reported foreign exchange turnover by currency pairs1 (Daily averages in April, in billionsof US dollars and percentages)1992Currency pairUSD/EURUSD/DEMUSD/FRFUSD/XEUUSD/OthEMSUSD/JPYUSD/GBPUSD/CHFUSD/CADUSD/AUDUSD/OthEUR/JPYEUR/GBPEUR/CHFEUR/OthDEM/J