UPDATE 1-March FX daily turnover hits $2.3 trln as virus fuels volatility – CLS

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LONDON, March 24 (Reuters) – The meltdown in financial markets over the coronavirus has sparked a huge jump in foreign exchange trading volumes, with average daily turnover so far in March up 27% on February as volatility soared, CLS said on Tuesday.

CLS, a major settler of trades in the foreign exchange market, said in a statement that high average daily volumes seen at the end of February had continued into March, with spot volumes rising by more than 50%.

So far in March, average daily turnover has hit $2.3 trillion, CLS said. That compares with $1.8 trillion in February and $1.86 trillion in March 2019.

CLS said February saw record daily volumes in trading of the Korean won, the Singapore dollar and the Israeli shekel.

March has seen forex market volatility soaring to multi-year highs as investors panicked over the economic impact of the coronavirus.

The Deutsche Bank Currency Volatility Index rose to more than 16% last week, having traded near record lows of below 5% in early February.

Major currency pairs such as dollar/yen and sterling/dollar have regularly seen daily moves of more than 1%, while currencies such as the Australian dollar and Norwegian crown have seen dramatic, multi-percent tumbles.

Many emerging market currencies have sunk to record lows as investors scrambled to buy dollars, the currency of choice for money managers and companies in a major economic crisis.

Traders say reduced liquidity has also been a problem, exacerbating the volatility in forex markets that has caught so many investors off guard.

CLS’s Head of Information Services Masami Johnstone said the jump in March volumes included a rise of 55% in spot trading, 15% in FX swaps and 36% in forwards.

“This was against the backdrop of the increased market volatility,” she said in the statement. (Reporting by Tommy Reggiori Wilkes; Editing by Jan Harvey)

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