FX markets in ASEAN and India poised for more robust 2017
This year has been a volatile one for FX markets, and the global macroeconomic outlook remains uncertain. Despite this, the majority of the 800 regional banks, brokerages and corporation surveyed by Bloomberg remain optimistic about the resilience of their FX markets. As we move into 2017, hedging against market volatility and navigating regulatory requirements were listed as their greatest FX challenges in the current economic climate.
ASEAN & India FX on the rise
India’s rupee and the ASEAN currencies are on the rise in 2016. Together they account for about 4% of the global FX market by turnover, according to a September 2016 Bank of International Settlements (BIS) Triennial Central Bank survey. The Singapore dollar, Indian rupee and Thai baht have all increased their share of the global OTC FX market since 2013, according to the latest data.
In terms of pricing, 2016 had been a solid year for the rupee and ASEAN currencies until the election of Donald Trump as US president spurred outflows from many emerging markets. Nonetheless, after a challenging 2015, where prices were hit by a weakening commodity complex, US Federal Reserve tightening and growth fears, prices against the US dollar have stabilized or recovered at least some of their 2015 losses.
Regulators with plenty to do
In both ASEAN and India, central banks have much to overcome as they try to sustain economic growth in the face of weakening global demand. Beyond monetary policy, regulation has also continued to affect FX markets, thanks in no small part to the numerous global scandals that have undermined public confidence in markets and resulted in nearly $9 billion in fines for various institutions.
Falling confidence has resulted in falling volumes, with the total daily volumes in global FX down from $5.4 trillion in April 2013 to $5.1 trillion a day in April 2016.
Despite this drop, the industry is fighting back, with the BIS working on a new code of conduct to help restore confidence in FX markets.