Activity in traditional foreign exchange markets increased substantially between 2001 and 2004

Average daily turnover rose to $1.9 trillion in April 2004, a 57% increase at current exchange rates

and a 36% rise when volumes are measured at constant exchange rates. This more than reversed

The fall in global trading volumes between 1998 and 2001. Turnover rose across instruments but

Particularly in the spot and forward markets.

In addition to valuation effects, factors that have arguably boosted turnover include investors'

Interest in foreign exchange as an alternative asset class to equity and fixed income, the more active

Role of asset managers and the growing importance of hedge funds.

The growth in turnover was driven by all types of counterparties. Trading between banks and

financial customers rose most strongly, and its share in total turnover went up from 28% to 33%.

Market commentary suggests that this reflected to a large extent the combination of a sizeable

Increase in activity on the part of hedge funds and commodity trading advisers and robust growth

Of trading by asset managers. This is in contrast with the period between 1998 and 2001, when

Activity in this market segment had been driven mainly by asset managers, while the role of hedge

Funds had reportedly declined. Trading between reporting dealers also rose between 2001 and 2004,

although its share continued to fall, from 59% in 2001 to 53% in 2004. Restraining factors might