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Foreign exchange liquidity in the Americas

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  • Bank for International Settlements

Abstract

This report discusses FX liquidity metrics and their drivers, reaching four conclusions. First, changes in FX markets have reduced the usefulness of some conventional FX liquidity metrics; several metrics need to be assessed together to give a better picture of market liquidity. Second, some metrics suggest that liquidity in FX markets has declined during some recent episodes of market stress. Third, technology appears to have changed liquidity dynamics - enhancing liquidity in normal conditions and offsetting the impact of market fragmentation, but also adding to FX volatility in stressed market conditions. Fourth, the impact of post-crisis regulatory change on FX market liquidity remains unclear and requires further study.

Suggested Citation

  • Bank for International Settlements, 2017. "Foreign exchange liquidity in the Americas," BIS Papers, Bank for International Settlements, number 90.
    • Handle: RePEc:bis:bisbps:90
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    References listed on IDEAS

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    Cited by:

    1. David Castañeda-Arévalo & Fredy Gamboa-Estrada, 2021. "Los determinantes de la liquidez en Colombia: un análisis del mercado de divisas de contado," Borradores de Economia 1185, Banco de la Republica de Colombia.
    2. Keiichi Goshima & Yusuke Kumano, 2018. "Monetary Policy Announcement and Algorithmic News Trading in the Foreign Exchange Market," IMES Discussion Paper Series 18-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
    3. Cantú, Carlos, 2019. "Effects of capital controls on foreign exchange liquidity," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 201-222.

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