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Banks and hedge funds are beefing up their foreign exchange desks as volatility boosts profits.

In the decade Tim Brooks has been buying and selling currencies, he’s grown used to feeling that the action is usually elsewhere. He and his team at Optiver Holding BV, a top trading firm in London, rely on volatility to generate quick profits from sudden moves in exchange rates. But dramatic swings largely evaporated after the global financial crisis of 2008, when the biggest central banks began cutting and then raising interest rates more or less synchronously. Occasional bursts of excitement notwithstanding—such as last year’s surge in the Japanese yen following a surprise interest-rate hike—currency trading ceded the spotlight to the stock and bond desks.

That changed after Donald Trump was reelected US president on pledges to shake up global trade. The Canadian dollar and the euro suddenly started gyrating with each trade threat, slumping when it seemed penalties were imminent and rallying when Trump announced a reprieve. And as the dollar has strengthened, the Federal Reserve has decoupled from other central banks, signaling it will keep rates steady even as others continue cutting.

With his firm’s average daily foreign exchange volumes doubling from 2024 levels, Brooks has found himself at the beating heart of the trading floor. A few months ago Optiver switched to round-the-clock operations to meet rising demand. One trader was relocated to Singapore to launch currency trading there, and another was moved from the commodities desk to Brooks’ foreign exchange team. “During most of my career, FX has been the asset class with the lowest volatility and the least interest from investors,” says Brooks, who joined Optiver as a trainee and today oversees foreign exchange options trading. “Now there’s more potential for price movement—and a lot more interest coming in.”

The renewed enthusiasm at Optiver is being echoed throughout the financial sector. Wells Fargo hired foreign exchange veteran Enrique Payan from Deutsche Bank in January to head up an enlarged currency options team, and Citigroup has bolstered its currency derivatives desks in London and Singapore, poaching two traders from Barclays.

January was the busiest month for currency options trading since February 2020, according to exchange operator CME Group Inc., with daily volumes 75% higher than early last year. Analytics provider Coalition Greenwich forecasts two consecutive years of revenue growth for bank trading in the currencies of developed economies, even as it expects declines for teams working with sovereign bonds and commodities. “FX has been a sleeping giant, but we’re emphasizing it in portfolios, because we think it can add value,” says Fredrik Repton of asset manager Neuberger Berman Group LLC.

The return of volatility in the $7.5 trillion-a-day foreign exchange market has rekindled interest from hedge funds, with activity in some Asian currencies soaring to a record since the US election, according to Citigroup Inc. While the number of funds focused entirely on currency trading plunged in the era of ultralow interest rates, the few remaining have seen an influx of cash, data tracker BarclayHedge reports. The job reached “peak sexiness” during the global financial crisis, says Kevin Rodgers, who ran Deutsche Bank AG’s global currency desk until 2014 and now works as an independent consultant. “That was a sweet spot in terms of having credibility on the trading floor.”

Staffing on currency desks has been severely depleted in recent years, with many traders replaced by algorithms that can easily beat humans. Those still on the job tend to be younger, because banks often fired expensive veterans but held on to a few junior staffers to keep the lights on. But given the increased appetite from hedge funds, banks are again hiring currency traders. “This feels like going back to the ’90s,” says Lauren van Biljon, a portfolio manager at Allspring Global Investments. “You’ve got a whole generation of traders who haven’t experienced volatility.”

Among the newcomers is Sasha Gill, who in September joined the London currency sales team at Barclays Plc fresh out of university. Her first few weeks were spent learning the slang of the trading floor—a “yard of cable,” for instance, means exchanging £1 billion for dollars—and more recently she’s been keeping an eye on Trump’s Truth Social platform. “It’s been really exciting,” she says. “We’ve had responsibility quite early on to help out with all the additional flow.”

Given Trump’s constant shifts in policy, it’s too early to say whether the jump in volumes marks a long-term revival. But recruitment in the field is picking up, particularly for people who worked on trading desks during the 2008 crash, when volatility skyrocketed, says Adam Gazzoli, co-founder of Adamis Principle Ltd., a recruitment firm in London. “Banks are looking to hire,” Gazzoli says. “A lot are short of that human element with gray hair and 20-plus years of experience.”

—With Greg Ritchie and Vassilis Karamanis

More stories like this are available on bloomberg.com

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