In the immediate aftermathof the financial crisis, foreign exchange (FX) was one of the few business lines that held up well, with volumes still strong and balance sheet usage from FX relatively contained compared to the credit and equity segments. Companies and investors hedging or playing the tail risks from the eurozone crisis and sharp swings in emerging market currencies owing to risk-on/risk-off market sentiment all gave FX trading desks plenty of work to do.
But 2012 took the shine off the market a little. The sheer scale of central bank intervention in the eurozone and elsewhere, which The Banker charted in its previous FX report in October 2012, gradually calmed fears and led to remarkably low volatility. That made returns elusive for currency fund managers, as David Wigan observes on page 36.
