Liquidity lags behind falling margins
LONDON - Dealers are reporting marginal improvement in foreign exchange liquidity six months into the year, despite a compression in bid/offer spreads.
Traders polled by FX Week said that liquidity has yet to return to pre-Lehman Brothers days, largely due to a reduction in the number of participants in the market. This includes liquidity that came from risk positioning by proprietary traders and hedge funds - which some dealers expect will continue to close down at 2008 rates.
The dealers said
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