London has strengthened its lead over New York and Frankfurt as the premier market for currency traders and interest-rate derivatives, a worldwide study showed yesterday.

Britain is the world’s largest centre of foreign exchange activity, with more than a third of all trading, the Bank for International Settlements said. It has snapped up a growing share of the market during an unprecedented global boom that has seen trading on the world’s foreign exchange markets rise by 71 per cent over the past three years.

The Basle-based bank said that hedge funds had played a key role in the expansion, which was much stronger than recorded over the previous three-year period.

Britain’s average daily turnover in foreign exchange was $1,359 billion (£675 billion) in April this year, up 80 per cent from April 2004, the study showed. That took its share of the global market up to 34.1 per cent, from 31.3 per cent three years ago. America had a 17 per cent share and the euro-zone had a share worth 10 per cent.

Britain’s growth in foreign exchange swaps was exceptionally strong, increasing by 110 per cent over the period, according to the Bank of England, which conducted the survey in the UK. Foreign exchange swaps involve contracts to exchange currencies in the future at an agreed rate. They account for 66 per cent of total UK foreign exchange activity, compared with 57 per cent three years ago.

The UK is even more dominant in the over-the-counter trade in currency and interest-rate derivatives, where it has a 42.5 per cent share of global turnover. Each day, derivatives worth $1,081 billion are traded through Britain, the figures showed, compared with $643 billion in the previous survey. The figure compares with a market turnover of $607 billion in the US, or 23.8 per cent of world activity.

The turnover of interest-rate swaps has increased by 137 per cent since 2004, the Bank said.

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