Global foreign exchange trading 'set to slow'

Global foreign exchange trading is expected to shrink in 2009 after a 15 per cent jump in activity last year, according to the latest figures.

Research from Greenwich Associates has found there was a significant growth in global foreign exchange trading last year as the world's financial markets endured a rollercoaster ride before slipping into freefall at the end of the year.

Foreign exchange provided one of the few bright spots for the banking industry last year, offering a source of steady profits for global banks suffering from the credit crunch and loss of confidence in the banking sector as a whole.

While the figure was only half of the rise experienced in the foreign exchange market of the two previous years, the researchers said most of this fall had been taken by hedge funds, with many banks still doing well in the sector.

The Financial Times recently suggested the International Monetary Fund would urge eastern European countries to adopt the euro to help ease volatility in the foreign exchange market.

However, analysts have doubted that the move would be a success, arguing most eastern European countries would not be willing to adopt the euro without enjoying the benefits of full EU membership.

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By Paul Jarvis