Canada FX Turnover Is Surging—Why It Hits Your Rates

Canada’s foreign exchange market isn’t a niche corner of finance—it’s a giant machine that quietly influences the price of borrowing, the return on savings, and the way big institutions manage risk. And that machine got meaningfully bigger.

In the Bank of Canada’s April 2025 Triennial Central Bank Survey (released October 2025), average daily turnover in Canada jumped to US$233 billion, up from US$172 billion in 2022—a 35% increase. Even more striking: single-currency interest rate derivatives turnover in April 2025 hit US$3.0 trillion, up 110% from US$1.4 trillion in 2022.

If your eyes glaze over at “FX” and “derivatives,” here’s the point: when institutions trade more currency and interest rate risk, that activity shapes market interest rates and funding costs—and those costs eventually show up in real-life products like fixed mortgage rates, variable-rate loans, GICs, and bond funds. This post connects the dots, in plain language, as part of our Interest Rates, Banking & Personal Finance series.

What the April 2025 survey actually tells us (and why it matters)

Answer first: The survey is a snapshot of how much currency and over-the-counter (OTC) derivatives trading happened in Canada, and the results show more hedging, more rate management, and a more active wholesale market.

Every three years, central banks (including the Bank of Canada) coordinate a global survey led by the Bank for International Settlements to measure turnover in:

• Foreign exchange (FX): spot trades, forwards, FX swaps, currency swaps, FX options
• Interest rate derivatives: forward-rate agreements, interest rate swaps, overnight index swaps, interest rate options

In Canada, 11 dealers participated (large banks and major dealers). The survey is based on where the sales desk is located—so it reflects activity booked through Canada.

Why should households care? Because Canada’s big financial institutions aren’t trading for fun. They trade to:

• hedge currency exposure for trade and investment flows
• manage interest rate risk from mortgages, deposits, and bond portfolios
• source short-term funding and liquidity

Those behaviors influence bond yields, swap rates, and short-term funding markets—which are the building blocks behind the rates consumers see.

A 35% jump in FX turnover: what drives it, and what it signals

Answer first: Rising FX turnover usually means more cross-border activity and more hedging demand, and that can translate into more volatile currency moves and changing costs for businesses—effects that can trickle down into prices and interest rates.

The Bank of Canada reported:

• Average daily FX and derivatives turnover in Canada: US$233B (2025) vs US$172B (2022) → +35%
• Total FX turnover during April: over US$5.1T (2025) vs US$3.4T (2022)
• Canada’s share of global FX turnover: 1.9% (2025) vs 1.8% (2022)

FX turnover isn’t “the loonie is strong”—it’s “risk is being managed”

More trading doesn’t automatically mean CAD is rising or falling. It usually means more people are trying to manage exposure to CAD, USD, and other currencies.

The survey also notes the top traded currencies in Canada are:

• US dollar (USD)
• Canadian dollar (CAD)
• Euro (EUR)

That lines up with Canada’s real economy: a trade-heavy country with deep financial links to the US, plus meaningful exposure to Europe through investment flows.

How this hits personal finance

FX market activity shows up in your life in three main ways:

1. Inflation pressure through import prices
   • A weaker CAD makes imported goods pricier (electronics, travel, some food inputs). Inflation expectations matter for interest rates.
2. Corporate pricing and hiring
   • Businesses that import or export hedge currency risk; their costs affect consumer prices.
3. Market stress and “risk-off” moments
   • When markets get nervous, currencies and funding costs can move fast. That can push bond yields around—feeding into fixed mortgage rates.

If you’re planning a big 2026 purchase (car, renovation materials, travel), CAD swings can be a hidden variable in your budget.

Interest rate derivatives surged 110%—that’s the mortgage connection

Answer first: When interest rate derivatives trading explodes, it’s a sign that institutions are actively hedging and repositioning for rate changes—and the pricing of those hedges is closely tied to fixed mortgage rates and bond yields.

The standout statistic:

• Single-currency interest rate derivatives turnover: US$3.0T (April 2025) vs US$1.4T (April 2022) → +110%

The Bank of Canada notes the increase was driven primarily by:

• forward rate agreements (FRAs)
• overnight index swaps (OIS)

Why would this spike in 2025?

2022–2025 was a period where rate expectations shifted repeatedly: inflation cooled from earlier peaks, growth patterns changed, and markets started gaming out where policy rates “settle.” In that environment, large institutions don’t want to guess—they hedge.

Here’s how that connects to you:

• Fixed mortgage rates in Canada are heavily influenced by Government of Canada bond yields and related swap pricing.
• Banks use swaps and OIS to manage the risk of funding long-term mortgages while their deposits reprice over time.
• When hedging demand rises, the price of that insurance can change—showing up as wider or narrower spreads in real loan pricing.

A simple way to think about it:

Banks can’t promise you a 5-year fixed rate without managing 5 years of interest rate risk.

The more volatile or uncertain the rate outlook, the more active (and sometimes costly) that hedging becomes.

The “how” of trading matters: voice vs electronic execution

Answer first: Execution method is a clue about market structure and stress—voice trading tends to rise when trades are complex or markets are jumpy, while electronic trading dominates standardized, high-liquidity flows.

In April 2025, the survey found:

• ~60% of FX trades were executed by voice
• ~40% were executed electronically

This surprises people because we assume everything is automated now. But FX still has a lot of:

• large, customized trades
• relationship-driven pricing for institutions
• moments where liquidity is thinner and humans negotiate

What this tells personal investors

You won’t trade FX like a bank, but the microstructure matters because it affects:

• how quickly exchange rates can gap during stress
• how wide bid/ask spreads get in volatile moments
• how hedged products behave (currency-hedged ETFs, global bond funds)

If you hold global investments, understand this: currency risk is real, and hedging isn’t free. Costs and effectiveness depend on market conditions.

What changed inside FX products: swaps down, currency swaps up

Answer first: The shift in product mix suggests different funding and hedging needs—and it’s relevant because swaps are often about short-term funding and liquidity.

The Bank of Canada reported:

• proportions of spot, outright forwards, and options stayed about the same as 2022
• the proportion of FX swaps fell
• there was an increase in the proportion of currency swaps

Here’s the practical interpretation:

• FX swaps are often used for short-term funding in a different currency (think: “lend me USD for a few days, I’ll give you CAD as collateral”).
• Currency swaps involve exchanging interest payments and principal, which is more like longer-horizon hedging and balance-sheet management.

Maturity clues: a lot of short-dated activity

The survey also shows:

• most FX swaps mature in less than 7 days
• most outright forwards cluster around 7 days to 1 month

That’s a reminder that a big chunk of this market is short-term plumbing—the day-to-day liquidity and funding that keeps the system stable.

When that plumbing gets expensive (or cracks), you can see knock-on effects in credit conditions, and eventually in consumer borrowing rates.

Practical moves: what to do with this if you have a mortgage or investments

Answer first: You don’t need to trade derivatives to benefit from this information—you need to borrow and invest with rate and currency uncertainty in mind.

If you’re renewing a mortgage in 2026

Try this decision framework (it’s simple, not perfect):

1. Start with your risk tolerance, not your rate prediction
   • If a payment jump would break your budget, stability is worth paying for.
2. Use a “payment stress test” at home
   • Add 1–2 percentage points to your expected rate and see if the monthly payment still works.
3. Don’t over-focus on the Bank of Canada policy rate
   • Variable rates track it more directly.
   • Fixed rates track bond yields and swap markets, which can move before any announcement.

If you’re investing (RRSP, TFSA, non-registered)

A higher-activity derivatives market is a reminder to be intentional about risk:

• Global diversification includes currency risk. If you own US or international equities, your return is partly an FX bet.
• Currency-hedged funds reduce FX swings but add costs and tracking differences. They’re not automatically “safer.”
• Bond funds aren’t cash. When rate hedging demand is high, bond volatility can surprise people who expected smooth returns.

A stance I’ll defend: If you can’t explain why you’re taking currency risk, you’re probably taking too much of it.

If you’re saving (HISA, GICs)

Wholesale rate markets influence what banks can offer. When markets expect lower rates, promotional savings rates often cool off quickly.

If you’re building a 2026 emergency fund:

• keep the core in a high-interest savings account for liquidity
• consider laddering GICs only for money you genuinely won’t need soon

What people ask next (quick answers)

Does higher FX turnover mean the Canadian dollar will move more?

Not automatically. But higher turnover often reflects more hedging and repositioning, and that can coincide with bigger moves when sentiment shifts.

Does interest rate derivatives activity predict mortgage rates?

It’s not a crystal ball. It signals how intensely institutions are managing rate risk. Mortgage pricing still depends on bond yields, competition, and credit conditions.

Should regular investors use derivatives because the pros do?

Usually no. Most households get better results by managing risk through asset allocation, diversification, and keeping debt manageable.

The bigger picture: why the Bank of Canada watches these markets

The Bank of Canada isn’t publishing this survey trivia for finance nerds. FX and derivatives markets are core infrastructure for how money moves, how risk is transferred, and how interest rates propagate through the economy.

As of December 2025, the Bank of Canada has maintained the policy rate at 2¼%, and markets are constantly repricing what comes next. In that environment, the April 2025 survey reads like a reality check: institutions are actively trading and hedging because the future path of rates and currencies still matters.

If you’re following our Interest Rates, Banking & Personal Finance series, this is one of the most useful mental models to keep: your mortgage rate isn’t set in a vacuum—it’s built on wholesale markets that react every day.

Next step if you want to be proactive: review your mortgage renewal window, run a payment stress test, and decide whether you want currency exposure in your portfolio on purpose—rather than by accident. What would your plan look like if rates stayed higher than you expect for another year?