Global FX Market: $9.6T Daily Turnover & Rising USD Dominance Shaping Strategy

The foreign exchange (FX) market, as defined by Britannica, is a highly decentralized over-the-counter (OTC) market made up of multiple sub-markets trading various currency pairs, including spot, forward, swap, futures, and options contracts. It functions 24 hours a day on business days, with major hubs in London, New York, and Tokyo providing continuous liquidity and facilitating international trade, investment flows, and currency risk management [8][9].

Recent data from the Bank for International Settlements (BIS) indicates the FX market’s scale has notably expanded: in April 2025, daily turnover in OTC FX markets averaged approximately USD 9.6 trillion, a ~28% increase from USD 7.5 trillion in April 2022. This reflects growing use of currency hedging in an environment of geopolitical shocks (such as tariffs) and monetary tightening. Major instruments contributing to this growth include outright forwards (+60%) and spot trades (+42%). Meanwhile, FX swaps remain the largest single category in USD terms, though their share of overall turnover has declined. [3][1][5]

Currency shares reflect shifting dynamics: the U.S. dollar appears in ~89% of trades—maintaining dominance. The euro’s share has slipped (to about 28.9%), sterling has dropped sharply (~10.2%), while the Chinese renminbi (yuan) and Swiss franc have risen (to ~8.5% and ~6.4% respectively). These shifts suggest incremental erosion in dominance of some established currencies and growing diversity, possibly driven by China’s expanding trade and financial openness. [3][4]

The structure of market participation is also evolving. “Other financial institutions” (non-reporting banks, institutional investors, hedge funds etc.) have increased their share, especially in spot and forward trades, pointing to expanding non-bank involvement in FX liquidity provision and hedging demand. Inter-dealer trading remains substantial (≈46%), but dealers’ trades with non-reporting financial entities now make up about half of turnover, particularly in spot and forward markets. [3][5]

Geographically, turnover remains concentrated: the UK (~38 %), U.S. (~19 %), Singapore (~11.8 %) and Hong Kong (~7 %) account for ~75 % of FX trading desks’ turnover. The dominance of London as the global FX hub persists. [3][4]

Strategic implications include the increasing cost of currency risk for corporate and institutional players, potential shifts in reserve currency patterns if non-USD currencies continue rising in share, and heightening importance of regulatory coordination given systemic risks in derivatives. Open questions include whether the declining share of major currency pairs signals lasting structural change, how FX market stress is managed under extreme volatility, and what the implications of greater non-bank participation are for liquidity and market resilience.