Modern trends in the development of the world foreign exchange market

International currency markets are the most important links in the global financial system of international economic relations.

The growth of currency transactions in the world takes place against the backdrop of global changes in the ratio of trade and financial transactions. In the total volume of non-cash payments, the share of payments for transactions in commodity markets has been constantly decreasing, and in financial markets it has been steadily growing. Most of the payments began to fall on currency transactions. Their development was conditioned by the processes of liberalization of national currency markets and internationalization of the world economy.

National currency markets exist in all countries with developed market economies. As national markets developed and their mutual relations, a single world foreign exchange market has developed. It includes global, regional, national (local) foreign exchange markets. These markets differ in volume, the nature of foreign exchange transactions and the number of currencies involved in transactions. World currency markets are concentrated in the world’s financial centers.

In the early 90s, about half of international currency transactions were carried out in three world currency markets: London, New York, Tokyo.

The leading financial center is London, which ranks first in the world in foreign exchange, deposit and credit operations. Only the daily volume of currency transactions in the English capital is approaching $ 500 billion.

The most objective indicator is the share of international financial transactions passing through the financial center.  London occupies 31% of the market by this indicator, almost twice ahead of its closest competitor – New York. London is also the leader in terms of the presence of foreign banks,  with Tokyo in second place and New York in third place. Finally, London is the largest net exporter of financial services at $8.1 billion. (1997). The second place belongs to Germany,  the third – the United States. Japan closes the list of nine largest financial centers.

Modern currency markets are characterized by the following main features and trends:

strengthening the internationalization of foreign exchange markets on the basis of internationalization of economic relations, the widespread use of electronic means of communication and the implementation of operations and settlements with them; unified technique of currency transactions and settlements carried out on correspondent accounts of banks; distribution of foreign exchange operations for the purpose of insuring currency and credit risks; speculative and arbitrage operations, far superior to foreign exchange operations related to commercial transactions. The number of participants has increased dramatically and includes not only banks and transnational corporations, but also other legal entities and individuals; instability of exchange rates; the predominance of cross-border transactions in the total mass of transactions concluded, which  account for from half to three quarters of the daily volume of currency transactions of the largest centers; high concentration of currency transactions. About 2/3 of transactions are accounted for by banks, 20% by other financial institutions (securities dealer companies, investment, mutual funds, etc.) and 16% by non-financial institutions (including some large speculators). At the same time, the banking sector is characterized by a high level of concentration. In the mid-90s, for example, in New York, 70% of the turnover of foreign exchange transactions of the market passed through 20 banks, and in London – 68%.

Foreign exchange markets ensure the prompt implementation of international settlements,  the interconnection of world currency markets with credit and financial markets.  With the help of foreign exchange markets, foreign exchange reserves of banks, enterprises, and the state are replenished. The mechanism of foreign exchange markets is used for state regulation of the economy, including at the macro level within a group of countries (for example, the EU).