FX Market Experiences Unprecedented Turnover
Global foreign exchange trading reached a record high in April 2025, with daily turnover exceeding $9.6 trillion. This figure represents a significant increase of over 25% compared to the figures recorded in 2022, according to data released by the Bank for International Settlements (BIS).
The surge in trading activity was reportedly triggered by President Donald Trump's "Liberation Day" tariffs, which were enacted on April 2. These tariffs introduced considerable volatility into global currency markets, initiating the most substantial shift in foreign-exchange activity seen in many years.
Researchers from the BIS, including Wenqian Huang, Ingomar Krohn, and Vladyslav Sushko, noted in their quarterly review that the US dollar experienced a sharp decline in response to the tariffs. This depreciation led to the dollar losing its status as a safe-haven asset and resulted in approximately $1.5 trillion in over-the-counter (OTC) trades per day during April alone. The FX market effectively served as a shock absorber during this period of market turbulence.
The established correlation between the US dollar and risky assets completely broke down, compelling investors to react swiftly. Many investors sought to hedge their US dollar positions as volatility levels spiked significantly.
Trump Tariffs Lead to Significant Dollar Decline
The implementation of Trump's tariffs initiated a widespread market reaction. The US dollar experienced a sharp downturn on the very day the measures were announced and did not recover its previous standing. In parallel, a JPMorgan index measuring currency volatility reached its highest point in two years during the same month.
Traders who maintained low hedge ratios found themselves particularly exposed to the market shifts. This vulnerability was exacerbated by two years of increasing global interest rates, which had already elevated the cost of hedging currency positions.
The BIS report highlighted the critical need for investors to adjust their US dollar hedges, especially given that many entered the month with relatively conservative hedge ratios. The sustained rise in interest rates from 2022 through 2023 had increased hedging costs across the financial landscape. As the dollar's value continued to fall, a significant number of investors moved to protect themselves against further losses, with some opting to relocate their capital to different markets altogether.
The Bloomberg Dollar Spot Index recorded a decline of over 7% in the first half of 2025, marking the most significant downturn for the US dollar in the first half of a year in five decades. While the index saw a slight recovery in the latter half of the year, the initial sharp decline had already had a substantial impact.
This market crash led to a surge in demand for financial instruments such as forwards and options, with trading volumes for these products experiencing a significant increase. However, the BIS noted that there was no indication of stress in dollar funding markets. The volume of FX swaps, for instance, rose only modestly since 2022, suggesting a stable funding environment.
BIS Survey Underscores Global Trading Boom
The data confirming the record trading volumes in 2025 originates from the BIS's triennial survey, which provides the most comprehensive analysis of global foreign exchange trading activity available. Over 1,100 financial firms worldwide contributed their trading data to this extensive survey.
The BIS had previously released a preliminary version of these findings in September. However, the final update serves to definitively confirm the speed and magnitude of market movements following the significant events of April 2025.
Stock markets across Asia displayed varied responses to the evolving economic landscape. In Hong Kong, the Hang Seng Index experienced a decline of 1.12%. Conversely, China's CSI 300 index saw an increase of 0.81%, closing at 4,621.75, bolstered by a rise in export figures.
Japan's Nikkei 225 edged up by 0.18% to conclude the trading session at 50,581.94, while the Topix index added 0.65%, finishing at 3,384.31. In South Korea, the Kospi index surged by 1.34% to reach 4,154.85, and the smaller Kosdaq gained 0.33%, closing at 927.79.
Australia's ASX/S&P 200 index dipped slightly by 0.12% to 8,624.4, as investors awaited the policy meeting of the Reserve Bank of Australia. In the United States, markets concluded the previous Friday on a stronger note. The S&P 500 climbed 0.19% to 6,870.40, marking its fourth consecutive day of gains and closing just 0.7% below its all-time high.
The Nasdaq Composite rose by 0.31% to 23,578.13, and the Dow Jones Industrial Average added 104.05 points, concluding the day at 47,954.99.