BISness Shifting currents in FX and interest rate derivatives
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Dec 8, 2025 Hyun Song Shin, economic advisor at the BIS, shares insights on systemic risk and global finance. Andreas Schrimpf, head of financial markets, discusses the surge in derivatives trading driven by policy changes. Goetz von Peter highlights the dollar's dominance and the rise of the renminbi in global trades. They analyze market structures under strain yet resilient and caution against interconnected leveraging in hedge funds. The conversation reveals how volatility, hedging activity, and trading patterns shape today's financial landscape.
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Derivatives Make Global Finance Fungible
- FX and interest rate derivatives make money fungible across currencies and enable global risk sharing.
- Turnover reached $9.5tn (FX) and $7.9tn (OTC IRD) per day, showing huge global scale.
April 2025 Spike Tied To Policy Volatility
- April 2025 saw extraordinary turnover partly because of heightened policy uncertainty and market volatility.
- FX turnover rose ~30% versus 2022 and OTC interest rate derivatives grew ~60% in that month.
Dollar Weakness Fueled Ex-Post Hedging
- Sudden dollar weakness in April triggered extensive ex-post hedging as investors sold dollars to limit losses.
- Hedging demand links closely to short-term dollar borrowing costs and prior dollar momentum had left investors exposed.