The foreign exchange (FX) market, long overshadowed by equities and bonds, is witnessing a resurgence in trading activity as heightened volatility stemming from a second Donald Trump presidency boosts potential profits, according to a report by Bloomberg.
For hedge funds, which once largely sidelined forex trading, the $7.5tn-a-day market is becoming a lucrative arena again. Activity has surged across major and emerging market currencies, particularly in Asia, with trading volumes in some regions reaching record highs since the 2024 US election, according to Citigroup.
Hedge funds are increasingly turning to currency trading to capitalise on sudden price swings. While many forex-focused funds disappeared during the era of ultralow interest rates and synchronised monetary policy, those that survived are now attracting fresh capital, according to data from BarclayHedge.
“The market has shifted, and hedge funds are moving back into FX,” says Kevin Rodgers, former head of Deutsche Bank’s global currency desk. “It’s reminiscent of the financial crisis when currency trading was at its peak.”
For hedge funds, the return of volatility presents an opportunity to profit from short-term bets on exchange rates. This trend has prompted banks and trading firms to rebuild their FX capabilities. Citigroup, for instance, has expanded its currency derivatives teams in London and Singapore, while Wells Fargo recently hired a veteran from Deutsche Bank to lead its currency options team.
The surge in hedge fund involvement is also reviving hiring in the FX market. Recruitment firms report increased demand for traders with experience navigating volatile markets, particularly those who worked during the 2008 financial crisis.
“Many desks had been downsized or replaced by algorithms in recent years,” says Adam Gazzoli, co-founder of London-based recruitment firm Adamis Principle. “But the renewed appetite for FX trading is driving banks to seek experienced talent who can bring a human element to the trade.”
Beyond hedge funds, asset managers are also increasingly incorporating FX strategies into portfolios, with Fredrik Repton of Neuberger Berman noting that: “FX has been a sleeping giant, but we’re emphasising it because of its ability to add value during volatility.”
January marked the busiest month for currency options trading since February 2020, with daily volumes surging 75% compared to the previous year, according to CME Group. Coalition Greenwich forecasts two years of revenue growth for forex trading in developed markets, even as other asset classes, such as sovereign bonds and commodities, face declines.
Optiver Holding BV, a top trading firm in London, reflects the broader enthusiasm. The firm has seen its average daily forex volumes double since 2024 and has switched to 24-hour operations to meet rising demand. “FX was often the quietest corner of the trading floor,” says Tim Brooks, who oversees Optiver’s forex options desk. “Now there’s more price movement and a lot more interest coming in.”
