Wednesday, September 1, 2010

Trillions Per Day in The Global Casino of Currencies: Brazilian Real Now Within 20 Most Traded

The Bank of International Settlements, BIS, released today its report on currencies (released once every 3 years). The Brazilian Real had the largest percentage growth in derivative contracts in recent years.

The Real can be bought as an ETF, BZF. We track all currencies live here.

Foreign exchange market in Brazil has nearly tripled since 2007, with the second highest growth among all emerging economies .

Interestingly, the new survey was published Tuesday shows how the period that coincides with the administration of President Luiz Inacio Lula da Silva, who attacked the "financial casino" in recent years, was also the time when the foreign exchange and derivatives market in Brazil became most globalized, while the currency has become an increasing target for betting and contracts.

$4T Per Day

According to the BIS, the world currency market grew 20% between 2007 and 2010, with contracts traded at around $ 4 trillion per day. Three years ago it reached $ 3.3 trillion. According to the new survey, the participation of the dollar continues to fall, a trend that has been occurring since 2001 when it peaked, controlling 90% of global foreign exchange market.

The euro and the yen had the greatest expansion. The European currency has gained 2% in ten years and today occupies 39% of all transactions.

Real Among the currencies of emerging countries, the real was a highlight, with the second highest growth in international market share, behind only the Turkish lira. The Brazilian currency, which in 2007 accounted for 0.4% of the foreign exchange market, now represent 0.7% in 2010.

Data for 2010 are the first to include not only the market of the real in Brazil, but throughout the world. The participation of 0.7% is small, especially against the dollar, with 85%. But the BIS admits that the change in expansion catches attention. The exchange market between Real dollars and went from daily contracts of U.S. $ 3 billion in 2004 to U.S. $ 5 billion in 2007 and U.S. $ 26 billion each day this year. The expansion follows a logic of real internationalization of emerging market currencies. Today, the currencies of 23 major emerging economies already account for 14% of the market, up from 12% in 2007.

Derivatives: $2.1T Per Day

The survey also shows that Brazil was the country where the derivatives market expanded the most over the past three years. At the height of the crisis, between 2008 and 2009, President Lula criticized Brazilian companies that had used the scheme to profit. Lula came to accuse them of "scoundrels" in a speech in Istanbul in May 2009. But the BIS shows that the derivatives market, which caused so much damage to Brazilian companies continues booming. Between 2004 and 2007, the volume traded daily in Brazil fell from U.S. $ 900 million to U.S. $ 100 million. But this year, reached $ 7.5 billion.

The increase in global derivatives contracts between 2007 and 2010 was 24% with a trading volume of U.S. $ 2.1 trillion per day. The Brazilian participation is limited to 0.3%, but the BIS numbers show that no other country, industrialized or emerging, has a percentage growth similar to that of Brazil.

(With news from O Estado de Sao Paulo.)

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