Hong Kong has experienced a dramatic 13 per cent fall in foreign exchange turnover during the past three years as slower economic growth and financial market turmoil throughout the region severely impacted activity. In a galling revelation for regulators, Hong Kong's 13 per cent drop in average daily turnover compared to a 32 per cent increase in Singapore, which maintained its global ranking in fourth place with average daily turnover of US$139 billion. Hong Kong Monetary Authority deputy chief executive David Carse said: 'The decline in turnover reflects changing market circumstances including particularly the impact of the Asian crisis and the depreciation of certain prominent currencies against the US dollar. 'Despite this, the latest figures show that Hong Kong remains a major centre for trading in foreign exchange and derivatives.' Releasing its highly respected three-yearly foreign exchange turnover survey last night, the Bank of England revealed Hong Kong had fallen down the rankings from being the fifth-largest foreign exchange centre in the world to seventh place. In 1995, the most recent time a survey was conducted, Hong Kong had recorded $86.5 billion in average daily foreign exchange turnover, but the draft results published yesterday revealed that figure had dropped to $79 billion. Similarly, average daily turnover in the over-the-counter derivatives market in Hong Kong fell 11 per cent to $4 billion. The survey revealed that both Germany and Switzerland - where turnover has traditionally been less than in Hong Kong - had leapfrogged the SAR, despite the fact that, in Switzerland, turnover had actually dropped 5 per cent. Britain remains home to the largest foreign exchange market in the world, recording a 37 per cent increase in daily turnover to $637 billion, far ahead of the United States, where, with the help of a 43 per cent jump in activity, average daily turnover reached $350 billion. Japan saw an 8 per cent decrease in turnover to $149 billion, while Germany experienced a 24 per cent increase in activity to $94 billion. The sharp drop in turnover in certain key centres such as Hong Kong and Tokyo was reflected through a decline in market share for trading between the US dollar and the yen in London, from 17 per cent of turnover to 13 per cent. Analysts said growing investor disillusionment in Japan meant there was reduced commercial buying of yen-denominated assets, which partially explained the fall in market share. Reflecting the growing interest of non-bank and non-securities firms' activities in the derivatives market, the Bank of England survey also revealed the share of interest rate business recorded by 'other financial institutions' which includes hedge funds, pension funds and building societies, soared to 24 per cent, from only 9 per cent in 1995. In Hong Kong, the most heavily traded currency pair this year was dollar-yen, accounting for 25 per cent of average daily turnover. However, trading in Hong Kong dollars against the US dollar has surged to account for 22 per cent of all foreign exchange trading in the SAR, replacing activity in US dollar-deutschemark. More significantly, in contrast to declining turnover in US dollar-yen and US dollar-mark, Hong Kong dollar trading was recorded 22 per cent higher this year than in 1995.