Forex trading 'on the increase'

The volume of foreign exchange (forex) trading increased by 15 per cent between 2007 and 2008, the latest report from Greenwich Associates has revealed.

Both companies and ’large financial institutions’ were found to have increased their investment activity in the sector - more than offsetting a decline in activity among hedge funds.

The forex boom is good news for the banks handling the trades - who otherwise endured a dismal 2008 due to the worsening credit crunch.

Billions of dollars were written down over the year, as the firms faced the implications of their exposure to complex financial instruments devalued by the crisis.

Collateral damage from the credit crunch has been still worse among hedge funds, leading them to scale back their trades.

Forex represents an appealing option for investors in times of financial strife, due to the sector’s limited volatility and the high levels of liquidity present in the markets.

By contrast, the bond and equities markets have faced extreme turbulence in the crisis - with the FTSE 100 share index currently trading around 40 per cent off its 2007 peak.ADNFCR-2318-ID-19119337-ADNFCR