Quarterly Bulletin
Foreign Exchange Markets and Exchange Rates Articles
| 2008 Q2 | A review of the work of the London Foreign Exchange Joint Standing Committee in 2007  (327k) This article reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2007. |
| 2007 Q4 | The foreign exchange and over-the-counter derivatives markets in the United Kingdom (606k) (By Grigoria Christodoulou of the Bank's Foreign Exchange Division and Pat O'Connor of the Bank's Monetary and Financial Statistics Division.) In April this year, the Bank of England conducted its usual three-yearly survey of turnover in the UK foreign exchange and over-the-counter currency and interest rate derivatives markets, which forms part of the latest worldwide survey co-ordinated by the Bank for International Settlements. The results show that the volume of foreign exchange activity in the United Kingdom rose by 80% between April 2004 and April 2007, increasing the UK share of the global market to 34%. Turnover in OTC currency and interest rate derivatives also rose considerably in the same period. This report sets out the results of the UK survey and then goes on to consider developments in these markets over the past three years. |
| 2007 Q2 | A review of the work of the London Foreign Exchange Joint Standing Committee in 2006 (351k) This article reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2006. |
| 2006 Q3 | The UK international investment position |
| Summer 2006 | A review of the work of the London Foreign Exchange Joint Standing Committee in 2005 (123k) This article reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2005. |
| Summer 2005 | Chief Economist Workshop April 2005: exchange rate regimes and capital flows A review of the work of the London Foreign Exchange Joint Standing Committee in 2004 |
| Winter 2004 | The
new sterling ERI
(181k) (by Birone Lynch and Simon Whitaker of the Bank's Structural Economic Analysis Division). This article explains proposals for a new sterling trade-weighted effective exchange rate index. The proposed new index would reflect more recent trade patterns, incorporate services trade and a broader set of countries, including those in Asia. The foreign exchange and over-the-counter derivatives markets in the United Kingdom
(137k) (by Peter Williams of the Bank's Monetary and Financial Statistics Division). In April this year, the Bank of England conducted the three-yearly survey of turnover in the UK foreign exchange and over-the-counter (OTC) currency and interest rate derivatives markets, as part of the latest worldwide survey co-ordinated by the Bank for International Settlements (BIS). The results show that the volume of foreign exchange activity in the United Kingdom has increased by nearly 50% since April 2001. Turnover in OTC derivatives has more than doubled in the same period. This article presents the main results of the UK survey and highlights the effects of developments in foreign exchange and OTC derivatives markets on volumes of activity. It also provides detailed breakdowns of UK survey data and a comparison with global survey results. |
| Summer 2004 | Recent
developments in surveys of exchange rate forecasts
(105k) (by Sally Harrison and Caroline Mogford of the Bank's Foreign Exchange Division). Expectations of future exchange rates can influence moves in the current exchange rate. This article summarises recent developments in the mean forecasts for dollar/euro, dollar/sterling and sterling/euro bilateral exchange rates taken from the Reuters survey. The properties of these mean forecasts are evaluated and the article shows that they are not reliable predictors of future exchange rates. A review of the work of the London Foreign Exchange Joint Standing Committee in 2003
(77k)This note reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2003. |
| Winter 2003 | Financial
stability and the United Kingdom's external balance sheet
(170k) (by Mhairi Burnett of the Bank's Monetary and Financial Statistics Division and Mark Manning of the Bank's Domestic Finance Division). This article, one in an annual series, examines the United Kingdom's financial transactions with the rest of the world, paying particular attention to the implications for financial stability. In recent years, the United Kingdom's stocks of external assets and liabilities have increased considerably, and each now exceeds £3.5 trillion. This is three times UK GDP and around a third of the United Kingdom's total financial assets. The monetary financial institutions (MFI) sector accounts for approximately half of the external balance sheet, reflecting both the international orientation of UK-owned banks and the cross-border activities of foreign-owned UK-resident banks. The article begins with a conceptual discussion of how external positions might affect financial stability, before turning to recent developments. The principal focus is on the MFI and private non-financial corporate (PNFC) sectors, in which the largest external positions exist. The discussion draws upon data from a variety of sources, including the Pink Book, sectoral financial balance sheets, the Bank of England and the IMF. |
| Summer 2003 | Foreign
Exchange Joint Standing Committee e-commerce subgroup report
(54k) This article describes recent developments in electronic trading in the foreign exchange market, based on a report produced by the e-commerce subgroup of the Foreign Exchange Joint Standing Committee. After a brief introduction to e-commerce in the context of the foreign exchange market, it discusses developments in electronic trading, including both single-bank and multi-bank internet-based systems, and explains market initiatives such as 'prime brokerage' and 'white labelling' that have been facilitated by electronic platforms. |
| Spring 2003 | A
review of the work of the London Foreign Exchange Joint Standing
Committee in 2002
(50k) This note reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2002. |
| Winter 2002 | The
external balance sheet of the United Kingdom: recent developments
(98k) (by Robert Westwood of the Bank's Monetary and Financial Statistics Division and John Young of the Bank's Domestic Finance Division). The external balance sheet (or international investment position) gives the most complete picture of the stock position of a country in its financial transactions with the rest of the world. The very breadth of coverage of the data leads inevitably to problems of measurement and valuation. Nevertheless, subject to certain qualifications, the data can throw some light on macroeconomic and financial stability issues related to the United Kingdom's cross-border financial links. This article, one in an annual series, discusses the recent evolution of the United Kingdom's external balance sheet, reviewing along the way some of the main methodological issues that impinge on an interpretation of the data. It concludes that, despite a persistent current account deficit, the balance of probability is that the United Kingdom still has net external assets, or at least the capacity to generate net investment income from overseas. There are also some grounds for optimism that the structure of its assets and liabilities has left the United Kingdom in a fairly strong position to withstand financial shocks. |
| Summer 2002 | Asset
prices and inflation
(108k) (by Roger Clews of the Bank's Monetary Instruments and Markets Division). This article is one in a series on the UK monetary policy process. It discusses some of the interconnections between inflation, monetary policy and asset prices. The Monetary Policy Committee is extensively briefed on asset market developments, along with other developments in the economy, before it makes its policy decisions. |
| Spring 2002 | The
London Foreign Exchange Joint Standing Committee: a review
of 2001
(39k) The Foreign Exchange Joint Standing Committee (FXJSC) was established in 1973 under the auspices of the Bank of England, largely as a forum for banks and brokers to discuss broad market issues. The membership of the Committee has grown over the past two years and now includes senior staff from many of the major banks operating in the foreign exchange market in London, as well as brokers, corporate users of the foreign exchange market, and the Financial Services Authority (FSA). The FXJSC met six times in 2001. For most of the year the main focus of the Committee's work was the completion of the London Code of Conduct for Non-Investment Products (NIPS). In the latter months of the year, and partly prompted by the terrorist attacks of 11 September in the United States, the Committee considered whether the London market should form a group to focus specifically on operational issues in the foreign exchange market. The Committee also discussed the impact of e-commerce developments, which will be a recurring theme of discussions during 2002. |
| Winter 2001 | The
foreign exchange and over-the-counter derivatives markets
in the United Kingdom
(133k) (By Sarah Wharmby of the Bank's Monetary and Financial Statistics Division). In April this year, the Bank of England conducted its triennial survey of turnover in the UK foreign exchange and over-the-counter derivatives markets, as part of the latest worldwide survey coordinated by the Bank for International Settlements. This article sets out the results of the UK survey and compares them with previous surveys and results for other major centres. |
| Autumn 2001 | Capital
flows and exchange rates |
| Summer 2001 | The
London Foreign Exchange Joint Standing Committee: a review
of 2000 The Committee met seven times in 2000. The Committee's key focus during the year was its work on the London Code of Conduct for non-investment products, in conjunction with its sister committees in the London gold and sterling deposit markets. There have also been discussions on other issues such as e-commerce, liquidity and the Continuous Linked Settlement Bank. |
| May 1999 | An
effective exchange rate index for the euro area This article describes the calculation of the index since the initial value of the euro was set on 31 December 1998, and also for the preceding period. The index is calculated by weighting together the individual exchange rates of the eleven euro-area countries against non euro area currencies; so it represents an effective index for the eleven countries as a group, rather than for the euro as a currency. The base year for the series is 1990, the same as the other effective exchange rate series published by the Bank and the IMF. The article compares the Bank's euro-area index with recent movements of the euro against the US dollar, sterling, the Japanese yen and the Swiss franc; with the Bank for International Settlements (BIS) index provisionally used by the European Central Bank (ECB); and with the IMF's 'broad' euro-area index, which has a greater country coverage. It also notes how the introduction of the euro has affected the exchange rate indices for individual countries. |
| February 1999 | The
yen/dollar exchange rate in 1998: views from options markets
(182k) (by Neil Cooper and James Talbot of the Bank's Monetary Instruments and Markets Division). 1998 was a period of unprecedented volatility for the yen/dollar exchange rate. To help to assess market participants' views on exchange rate developments, the Bank of England uses a range of techniques that employ information from the over-the-counter (OTC) currency options markets. This article describes these techniques and shows how they can be used to assist our understanding of market perceptions of the yen/dollar exchange rate over this period. Standard quotes from market-makers allow inferences about the degree of uncertainty attached to the future path of an exchange rate. In addition, the articles notes probability density functions that enable the description of a more complete distribution of agents' views. These PDFs show that agents were not anticipating a large rise in the yen in October 1998; in fact, many were buying options to hedge against a further depreciation. Information from option prices can also tell us something about market views on the efficacy of central bank intervention in the foreign exchange market. Both interventions in the yen/dollar market resulted in a short-run appreciation of the yen. But options traders did not believe that the unilateral intervention by the Bank of Japan in April, or the co-ordinated intervention in June, would change the balance of probabilities over the short term of a further sharp depreciation in the yen versus a sharp appreciation. By the end of 1998, however, traders were attaching a higher probability to a large yen appreciation than to a large yen depreciation. |
| November 1998 | The foreign exchange
and over-the-counter derivatives markets in the United Kingdom
PDF
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| November 1997 |
Decomposing exchange rate movements according to the
uncovered interest rate parity condition Implied exchange rate correlations and market perceptions
of European Monetary Union |
| November 1996 | Interpreting sterling exchange rate movements (68k) (by Mark Astley and Anthony Garratt of the Bank's Monetary Assessment and Strategy Division). This article considers the analysis and interpretation of exchange rate fluctuations. It stresses the importance of identifying the sources of exchange rate movements, and recognising the many channels through which they can affect consumer prices. It reports empirical results which confirm that there is no simple relationship between the exchange rate and inflation. Sterling exchange rate depreciations are not necessarily associated with rises in UK consumer prices relative to prices overseas. In particular, UK prices may fall relative to those overseas if the depreciation is caused by increases in aggregate supply or falls in real spending, but rise if it is caused by increases in the money supply. |
| November 1995 | The foreign exchange market in London (43k) (by Dale Thomas of Foreign Exchange Division) sets out the results of the survey earlier this year into London's foreign exchange market, and compares them with those from previous surveys and for other major centres. The results showed that London has consolidated its position as the world's largest centre for foreign exchange business. |
| August 1995 | The behaviour of the foreign exchange market (45k) (by Professor Alan Kirman) examines what developments in economic theory can contribute to an understanding of the recent evolution of the foreign exchange market. It considers whether alternatives to the standard efficient-markets model can offer a better explanation of the market's actual behaviour. |
