Singapore Overtakes Japan as Asia’s Biggest Foreign-Exchange Hub

Singapore Overtakes Japan as Asia’s Biggest 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-state’s average daily foreign-exchange volume increased 44 percent to $383 billion as of April from $266 billion in the same month in 2010, the Monetary Authority of Singapore said in a statement. The average interest-rate derivatives volume climbed 6 percent to $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. (ANZ) in Singapore, said before the release of the statement. “Part of this 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 just behind the U.K. and U.S. in the $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 today. “It will also better position our financial center to serve the investment and risk management needs of financial institutions and corporates throughout Asia.”

Currencies trading in Singapore is still one-seventh the size of the U.K. and less than a third of the U.S. The U.K. has 41 percent of the global market, followed by the U.S. with 19 percent, according to the BIS, record-keeper of the world’s central banks. Singapore has a 5.7 percent share, followed by Japan’s 5.6 percent and Hong Kong’s 4.1 percent, BIS said.

“Foreign-exchange market activity has become ever more concentrated in a handful of global financial centers,” the Basel, Switzerland-based BIS said in a report today. “The vast majority of global FX trading in 2013 has occurred via the intermediation of dealers’ sales desks in five jurisdictions.”

Funds Withdrawal

The Singapore dollar has fallen 2.2 percent against the U.S. currency in the past three months, the smallest drop among key Southeast Asian nations as investors withdrew funds from developing countries. About $44 billion has been pulled out of emerging-market stock and bond funds globally since the end of May, data provider EPFR Global said on Aug. 23.

Foreign-exchange average daily trading volume in Singapore was $326 billion in April 2013, a 6.2 percent increase from October 2012, according to a semi-annual survey published by the Singapore Foreign Exchange Market Committee on July 29.

“The government has also been encouraging more and more large financial institutions to set operations here,” ANZ Bank’s Goh said.

The Swiss central bank said two months ago it set up a new Singapore office to ease the round-the-clock management of its exchange-rate cap, end the need for the Zurich trading desk’s night shift and help manage its investments in Asia.

Singapore’s position as a regional bond-trading center led to the choice of the city as the location of the first foreign branch in the Swiss National Bank’s 106-year history, President Thomas Jordan said July 11.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net