“No one has yet been accused of a crime in the foreign exchange market, but there is a lot of talk of disturbing practices, including dealing in personal accounts against clients’ interests. This could be a scandal as big as the fixing of interbank lending rates. However, the probes seem unlikely to address the hardest questions about how the whole currency business works.

“First, why is this business so huge? By the latest count of the Bank for International Settlements, currency transactions total $5.3 trillion a day. That’s close to 100 times more than the actual volume of exports involving changes of currency, according to the World Trade Organisation.

“Trade is not the only solid economic reason to use the FX market. But even assuming tourism, capital investments and truly helpful flows in financial portfolios increase the genuine need for foreign currency, the daily volume would be less than $200 billion a day. That leaves more than 95 percent of the business to be explained.”

***

Read full Reuters opinion here