Bank revenues surge on trading over what Fed will do

Weaker Yen

The increase was aided by a “substantial” jump in trading of the dollar against the yen, which more than doubled, the central bank said. Japan’s currency has weakened 11.5% against the greenback this year.

JPMorgan’s foreign-exchange volatility index surged to 11.96% on June 24, from 8.07% at the end of last year. At 9.7, the gauge is now up 20% for the year.

Fed Chairman Ben S. Bernanke stoked the surge in volatility when he raised the prospect of the U.S. central bank reducing its $85 billion of monthly bond purchases later this year.

In the euro region, ECB President Mario Draghi said he plans to keep the benchmark interest rate at a record-low 0.5% for an “extended” period, and that he’s considering additional measures to boost the economy of the 17-nation bloc.

The Bank of Japan refrained from adding to its unprecedented monetary stimulus earlier this month and raised its assessment of the nation’s economy, referring to a recovery for the first time since before a record 2011 earthquake.

Credit Suisse, Switzerland’s second-biggest lender, said July 25 that increased currency volatility helped boost second- quarter earnings. “Revenues from foreign exchange improved as higher market volatility led to increased client activity,” the Zurich-based bank said in a statement.

HSBC Report

HSBC, one of the few banks to disclose income from foreign exchange, reported revenue of $871 million from the business in the first quarter, compared with $746 million in the three months ended Dec. 31. Currency trading was the biggest contributor to revenue at HSBC’s global markets unit, the bank said on May 7.

Bank of America Corp. Chief Financial Officer Bruce Thompson singled out currencies as one of the areas “where the markets were good” on a July 17 conference call after the Charlotte, North Carolina-based lender reported a 63% jump in second-quarter net income.

“For the players who are strong in foreign exchange, they will remain strong for a long time given the high barriers to entry,” Chirantan Barua, an analyst in London at Sanford C Bernstein Ltd., said in a phone interview. “It’s very hard to gain share in the international foreign exchange market for smaller attackers.”

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