A Brief Look at Forex Magnates' QIR2: Charging against Low FX Volatility

While FX volatility is a metric which is hardly predictable, there are many ways in which a brokerage can address

qir2As many of you are fully aware, foreign exchange trading activity during the summer months is usually  subdued. This year however, the FX market environment has been quite different from what we have observed in recent years. In the run-up and after the eruption of the financial markets crisis in 2008, a variety of factors have been influencing the foreign exchange markets.

After a spark of safe haven demand for the dollar, it has dropped on the announcement of the quantitative easing policy by the Federal Reserve. When investors turned to the euro to seek a new stable currency, the news about the concealment of sovereign debt by Greece triggered yet another turmoil directing investors out of the euro into the US dollar and the Japanese yen.

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After the additional rounds of quantitative easing in the US and the ongoing turmoil across the Euro Zone spreading to the currency markets, we entered a phase of high volatility in the major currency pairs. Traders and brokerages have enjoyed a bout of volatility with the European Central Bank (ECB) and the FED passing the ball between each other, easing and tightening monetary conditions until the end of 2012.

In December 2012, the center stage was taken by the new Prime Minister of Japan, Shinzo Abe, who has pledged to turn the Japanese economy around with a new set of policy measures effectively targeting a relatively high exchange rate which has been pressuring Japanese exporters for years.

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Nobody knows with certainty whether his devaluation efforts will produce any good for the Japanese economy in the long run, but what the new governor of the Bank of Japan did to turn the market around has resulted in the most rapid depreciation of a major currency in a while, with the Japanese yen shedding value across the board and leading to record trading volumes for Forex brokerages in H1 2013.

Low FX Volatility: Diversifying in an Increasingly Challenging Environment

Coming to 2014, we are still experiencing the lowest FX volatility in 21 years as all central banks have virtually gone “all-in” in their monetary policy efforts. In the latest Forex Magnates’ Quarterly Industry Report (QIR), we address the challenges which the brokerages have been experiencing with declining volumes, and speak with two of the best and the brightest brokerages in the industry. Saxo Bank’s CEO, Kim Fournais and Dukascopy’s Chief Broker Officer, Dimitry Kukels have shared with Forex Magnates reporters their ways to diversify a pure FX offering, offsetting low FX volatility in our QIR article dubbed, “Low FX Volatility: Diversifying in an Increasingly Challenging Environment.”

With different approaches, they are committed to provide their traders various ways to assist them with trading opportunities by diversifying their offerings. With Saxo Bank dominating the multi-asset platform business and Dukascopy committing to offer their clients indices and commodities trading in the coming months, there is always a way out of low FX volatility for brokerages targeting retail traders.

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