Institutional foreign exchange volumes bounced back in September 2025, climbing roughly 12% across major platforms as currency markets digested the Federal Reserve's first rate cut in nine months and the dollar found a floor after months of decline.

The U.S. Dollar Index steadied around 97–98 throughout September after dropping 10.1% year-to-date through mid-month, marking its steepest annual decline since 1990.

The Fed's 25 basis point cut on September 17 brought rates to the 4.00–4.25% range, but the move did little to revive the dollar's fortunes as traders focused on labor market weakness and persistent inflation above target.

Cboe FX Volumes Break Back Above $1 Trillion

Cboe FX posted total volumes of $1.08 trillion in September with average daily volume reaching $49.1 billion across 22 trading days. The numbers represented a 12.4% monthly increase and brought the platform back above the trillion-dollar threshold for the first time since July.

The September rebound followed two consecutive months of softer activity and came despite continued uncertainty about Federal Reserve independence and the sustainability of monetary easing amid political pressures from the White House.

Daily trading patterns reflected the market's reaction to the Fed's September 17 decision, which was unanimous except for newly appointed Governor Stephen Miran, who voted for a larger half-point cut. Powell characterized the move as a “risk management cut” to prevent further labor market deterioration rather than the start of aggressive easing.

In the meantime, the Bank for International Settlements published its triennial survey, which showed that global FX volumes rose to record levels, reaching $9.6 trillion per day.

Japanese Volumes Snap Losing Streak

Tokyo Financial Exchange 's Click365 platform posted its first monthly increase since summer, with volumes climbing 19.6% to 1.42 million contracts and average daily volume reaching 64,689 contracts. The rebound broke a string of declines that had pushed the platform to its lowest levels in over a year.

USD/JPY trading drove much of the recovery, with volumes surging 26.8% month-over-month as the pair hovered near the 150 level that had previously triggered Japanese intervention. TRY/JPY volumes jumped 39.9% as traders positioned for diverging monetary policies between the Bank of Japan and central banks in emerging markets.

The year-over-year comparison remained challenging, with total volumes still down 26.6% from September 2024 levels, highlighting the persistent weakness in Japanese institutional appetite that has characterized much of 2025.

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European Platforms Hold Steady

Deutsche Börse's 360T platform recorded total volumes of $767.5 billion with average daily volume of $34.9 billion, representing a modest 12% increase from August's softer performance. The European venue benefited from continued euro strength, which climbed to $1.19 in early September before settling back toward $1.17 by month-end.

Euronext FX posted volumes of $510.5 billion with average daily volume of $23.2 billion, maintaining relatively stable activity levels despite broader market turbulence. European institutional traders continued to find opportunities in currency hedging and cross-border flows as the euro consolidated gains that had taken it up roughly 12% against the dollar year-to-date.

The ECB's decision to hold rates steady while the Fed cut provided a brief tailwind for euro positioning, though momentum stalled as traders questioned whether the dollar's decline had run its course or represented a temporary pause in a longer structural adjustment.

Fed Policy Drives Market Dynamics

September's currency movements reflected the tension between deteriorating U.S. labor market data and inflation that remained stubbornly above the Fed's 2% target. Nonfarm payrolls rose by just 22,000 in August while the unemployment rate climbed to 4.3%, a four-year high that strengthened the case for rate cuts.

“Labor market weakness could soon outweigh concerns about inflation,” Powell had signaled at Jackson Hole in late August, setting up the September move. But inflation data complicated the picture, with August CPI at 2.9% year-over-year and core inflation running at 3.1%, leaving little room for rapid easing.

The Fed's updated economic projections called for another 50 basis points in cuts by year-end and a quarter point in 2026, slightly more aggressive than markets had priced in. GDP growth forecasts were revised higher for 2025 to 1.6% from 1.4%, while PCE inflation expectations for 2026 were raised to 2.6% from 2.4%.