Currency traders from Deutsche Bank to HSBC, after enjoying a boom just a few months ago amid speculation the Federal Reserve was preparing to pare its record stimulus, are again seeing their profits squeezed.
Deutsche Bank, the biggest currency trader, said 29th October that a 'flat' market was 'negatively affecting FX revenues', while HSBC said this week that revenue from foreign-exchange tumbled 10% in the third quarter from a year earlier.
As speculation rose the Fed will keep pumping $85bn a month into the financial system at least through early 2014, volatility in the $5.3tril-a-day foreign-exchange market fell, making it harder for traders to profit from rapid price swings. JPMorgan Chase's Global FX Volatility Index fell as much as 37% from a more than one-year high in June.
'We’ve had so many false dawns in a change in the monetary environment that you won’t see big moves until something actually happens', Kit Juckes, a global strategist at Societe Generale in London, said in a phone interview Wednesday. 'I’m looking forward to 2014 and thinking we’ll probably be stuck in the same range'.
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image: © Barry Caruth