Currency trading at ICAP, the world’s largest interdealer broker, fell to its lowest monthly level in more than six years as a drop off in volatility and uncertainty over the trajectory of US monetary policy led to a slump in foreign exchange markets.

The London-based group said on Monday that spot foreign exchange fell 17 per cent year-on-year to $77bn in October, the lowest level recorded since ICAP bought its currency trading business EBS in 2006 and the third consecutive month in which volumes had fallen.

The drop in activity reflects deep-seated confusion among forex investors over the Federal Reserve’s plans to start scaling back its vast asset purchase programme. Many were caught out by the Fed’s decision in September to delay “tapering” and, with uncertainties exacerbated by the US government shutdown in early October, they chose to sit on the sidelines until the situation became clearer.

Speculators have been further frustrated by low volatility in the main currency pairs – in particular, the euro-dollar, which accounts for a quarter of global foreign exchange turnover but has traded in a tight range for much of the last year.

“An environment where there has been little movement in the major currencies, including the euro and the yen has affected EBS volumes,” ICAP said in a statement.

“Low volatility for bigger pairs has made the environment conducive to bank internalisation,” the company added, referring to banks’ practices of matching trades for clients within their own systems.

While EBS has reported falling spot volumes, investors were also hedging their risk by buying derivatives. CME, the world’s largest exchanges operator by market value, reported a 9 per cent fall to an average of 644,000 contracts traded per day for October, compared with the same period a year earlier. However, the volume in the CME’s FX options rose 91 per cent.

Analysts at JPMorgan noted that euro-dollar has been “one of the least volatile dollar-based pairs outside of managed currencies like emerging Asias”.

The group has been radically reshaping its currency trading business in the past 12 months in response to some user complaints. Customers had criticised EBS over its policing of the platform, arguing that some anonymous customers were exploiting delays in technology to make money.

However, both CME and ICAP reported growing business related to US interest rates amid hopes the Federal Reserve may signal an end to its loose monetary policy. ICAP said its volume from trading US Treasuries rose 25 per cent to 144.2bn in October while interest rate volume at CME averaged 4.9m contracts per day in October, up 20 per cent from a year ago.

This article has been amended to reflect that ICAP’s volume from trading US Treasuries rose 25 per cent in October, and not its revenues

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