The Bank for International Settlements triennial FX survey,
published in early September of 2010, revealed that the currency
markets, already the largest traded market in the world, had risen
to record levels. The leap in average daily volumes from $3,300bn
in 2007 to $4,000bn this year was led by an almost 50 per cent
increase in spot FX, to $1,500bn per day. The survey also revealed
the increasing participation of hedge funds, pension funds and
mutual funds in FOREX, which many see as confirmation of the
growing acceptance of foreign exchange as an asset class.
Such growing acceptance may be the direct result of currency
markets having a low correlation to other markets. During the
financial crisis, most risk assets fell sharply and correlations
across asset classes increased, but investors who were long
'safe haven' currencies or short 'risk' currencies
generated good returns. Since FX pairs are simply a ratio of one
currency to another, FX markets cannot crash in
