FX

Currency markets sit beneath almost every cross-border trade and investment, turning interest-rate differentials, capital flows and policy into exposure for anyone holding assets or liabilities in more than one currency. This hub covers FX drivers and the transaction and translation risks that follow.

How the market works

FX is the largest and most liquid market in the world — a decentralised, over-the-counter market that trades around the clock through banks and electronic venues rather than on a central exchange. Currencies trade in pairs (EUR/USD, USD/JPY) across three main instruments: spot, outright forwards and FX swaps, the last used mainly to manage short-term funding and roll positions. Prices are driven by interest-rate differentials, capital flows, trade balances and central-bank policy. For corporates and investors, exposure shows up as transaction risk (contracted cash flows), translation risk (reporting foreign assets/earnings in the home currency) and economic risk (competitive position), typically hedged with forwards and options.

Major trade flows

The BIS Triennial Survey put global FX turnover at about US$9.6 trillion per day in April 2025, up 28% in three years. By instrument, FX swaps were the largest at ~42% (~US$4trn/day), followed by spot at ~31% and forwards at ~19%. The US dollar remains dominant, on one side of roughly 89% of all trades, underscoring its role as the world’s funding and invoicing currency; the euro, yen and sterling follow. Trading concentrates in a few hubs — London first, then New York, Singapore and Hong Kong — which set global liquidity and pricing.