How Did the FX Market Growth Further Through 2021?

While 2021 was a challenging year for many businesses and marketplaces, it’s fair to say that the ongoing coronavirus pandemic also created new and exciting opportunities for others.

Certainly, the last 12 or 18 months have seen an increase in forex trading volumes and opportunities in the global marketplace, while rising volatility has also enabled risk-hungry investors to leverage price shifts to their advantage.

But how exactly has the forex market grown of late, and what are the best currencies to trade in 2022? Let’s find out.

How Did the Forex Market Grow Through 2021?

By the beginning of 2022, the global FX market was worth an estimated $2.409 quadrillion, while a little over $6.6 trillion traded on a daily basis.

Interestingly, basic foreign exchange or FX swaps dominate this daily activity, seeing some $3.2 trillion change hands in total. Currency swaps account for a further $108 billion, while options and alternative vehicles generate around $294 billion in volume.

While the market grew incrementally when compared with 2021, it has seen marked growth over the course of the last six years. Back in 2016, for example, analysis performed by the Bank for International Settlements (BIS) valued the global forex market at $1.934 quadrillion, while daily trading volumes were just $5.1 trillion.

Interestingly, these numbers also declined slightly in relation to 2015’s figures, with this the last time that the fx market has seen its headline numbers depreciate.

Key Volume Drivers and the Most Traded Currency Pairs

While we’ve seen a dramatic increase in the rise of retail and female traders over the course of the last six years or so, hedge funds, banks and institutional investors continue to dominate daily FX trading volumes.

To this end, retail forex trading only accounts for a mere 5.5% of the

entire forex market globally, making it a relatively small consideration overall.

When it comes to the most popular currency pairs in forex trading, there’s no doubt that the USD/EUR is the standout asset. This pair accounted for around 24% of all FX volumes in 2021, which should come as no surprise given that the two currencies represent the two largest economies in the world.

Next up is the relative safe-haven asset of the USD/JPY, which is highly popular during times of economic uncertainty and accounted for 17.8% of daily trading volumes last year.

The USD/GBP trailed in third place with 9.3% of the total trading FX volume, with investors having leveraged this pair to capitalise on the relative weakness of the British pound.

The Last Word

Clearly, FX trading offers considerable value to investors during challenging economic times, as despite the market’s innate volatility, it provides opportunities to leverage from price shifts and profit without assuming ownership of the underlying instruments.

Similarly, FX traders can capitalise on inflated leverage and high liquidity, which combine to increase your potential returns and allow for seamless buying and selling in the real-time marketplace.