Global currency trading has soared by more than a fifth over the past three years to $4 trillion a day. 

This was largely driven by a 48 per cent jump in turnover of spot transactions which rose to $1.5 trillion in April 2010, from $1 trillion in 2007.

The rise in spot transactions partly reflects the increasing popularity of algorithmic trading with institutional investors.

Also known as black box trading, this uses computer programs to enter trade orders, often controlling factors such as timing, price or quantity. These can process thousands of trades a minute.

Meanwhile, the ease of trading over electronic platforms has also boosted the appeal of currency trading for private investors.

The triennial report from the Bank for International Settlements show the euro/dollar remains by far the most dominant currency pair, with a 28 per cent share of all trades.

The dollar/yen pair saw a slight increase to 14 per cent of turnover.

However, the sterling/dollar pair continued to fall out of favour from its peak in 2004 to hold a 9 per cent share.

Among the 10 most actively traded currencies, the Australian and Canadian dollars both increased market share, while sterling and the Swiss franc lost ground. The market share of emerging market currencies increased, with the biggest gains for the Turkish lira and the Korean won.

The report also reveals that London is still the home of forex trading, where 36.7 per cent of turnover takes place.

Between 2007 and 2010 the capital saw its share of the average daily turnover jump by around a quarter to $1.9 trillion

In contrast, the US, which is the second most important currency centre sees around half the amount of business. Turnover also soared in Japan which nudged out Singapore and Switzerland to take the third spot.