Singapore overtakes Japan as Asia's top foreign-exchange hub

Singapore overtook Japan as Asia’s biggest foreign-exchange center for the first time as trading surged in the past three years, the city’s central bank said, citing a survey by the Bank for International Settlements.

The city’s average daily foreign-exchange volume increased 44% to US$383 billion ($490 billion) as of April from US$266 billion in the same month in 2010, the Monetary Authority of Singapore said in a statement yesterday. The average interest-rate derivatives volume climbed 6% to US$37 billion over the same period, the highest in the region after Japan, it said.

“Singapore has definitely established itself as a hub for foreign-exchange trading,” Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore, said before the release of the statement. “Part of this emergence is due to the increasing importance of Asian currencies, and Singapore’s time zone is well-suited for that.”

The increase in ranking puts Singapore behind only the U.K. and U.S. in the US$6.67 trillion global currencies trading market, according to the Bank for International Settlements or BIS. The city’s foreign-exchange market expanded as the government offered incentives to boost its financial markets, which also led to a surge in the nation’s fund management industry, where more than 500 asset managers oversee about $1.1 trillion.

GROWING STRENGTH

“Our growing strength in foreign exchange is a key complement to the development of capital market and asset management activities,” Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore, said in the statement. “It will also better position our financial center to serve the investment and risk management needs of financial institutions and corporates throughout Asia.”

Foreign-exchange trading worldwide surged to an average US$5.3 trillion a day in April 2013, boosted by greater yen volumes, BIS said. Trading increased 33% since the same period in 2010, the BIS said, citing a survey of currency traders it runs every three years. The yen had the biggest jump in trading activity among major currencies, while the euro’s role as the second-most traded currency was reduced.

The Chinese yuan entered the top 10 most-actively traded currencies, taking the ninth spot from 17th three years earlier. While trading increased in Singapore, the city’s currency was ranked 15th, down three notches from 2010, according to the BIS. It was the seventh most-actively traded currency in 1998.