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Derivatives

Eastern Eurpean FX Trading Volumes Rocket

Foreign exchange trading volumes on Eastern European currencies have soared over the last quarter as derivatives houses have gotten bullish on the countries' growth.

Foreign exchange trading volumes on Eastern European currencies have soared over the last quarter as derivatives houses have gotten bullish on the countries' growth. One trader said volumes have more than doubled in the past quarter. Popular trades are put spreads and straight long cash positions, in which participants aim to achieve 5-10% appreciation over the next six months to a year, said a trader.

General bullishness about the Eastern European countries as they prepare to join the European Union is driving much of the trend, noted a trader. The absorption of 11 currencies into the euro also dried up many carry trade opportunities on the more liquid currencies, encouraging players to seek out other opportunities. Robert Tamiso, founder of specialist investment firm Tamiso & Co., noted that the advent of the euro has turned more attention on second-tier currencies in Eastern Europe as well as Scandinavian countries such as Norway. He was speaking at Incisive Media's FX Week USA conference earlier this month. Speaking at the same conference Ronald DiRusso of the Sigma Fund at Northbridge Capital noted that the Canadian and Australian dollars both underwent a big jump in liquidity after the single European currency was introduced.

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