Volatile currency moves in 2025 have pushed emerging market foreign exchange into the spotlight, with trading volumes surging and hedge funds and banks reporting strong gains from the swings, according to a report by Reuters. Activity in the Hungarian forint has more than doubled since January, traders said, as investors reposition amid heightened global uncertainty and a weakening US dollar.
The forint has strengthened around 20% against the dollar this year, putting it on track for its best annual performance in nearly 25 years. Broader emerging market currencies have also rallied, with MSCI’s Emerging Market Currency Index hitting a record high in July and posting its strongest annual gain since 2017.
Market participants said the moves have been driven by sharp shifts in developed market currencies, particularly the dollar, prompting investors to rotate into higher-yielding emerging markets. Hedge funds have been active in positioning for the trend, while the top 25 global banks have seen a jump in revenues from emerging market FX trading, at $40bn in the first nine months of the year, which has outperformed activity in G10 currencies, at $19bn.
The volatility has also drawn regulatory attention. The International Monetary Fund has warned that rising FX volumes and concentration among a small number of large banks could amplify risks during periods of market stress.
