The Serious Fraud Office (SFO) today confirmed it has launched a criminal inquiry into the alleged rigging of foreign exchange (forex) markets.

The investigation into whether traders benefited from the manipulation of benchmark forex prices comes amid an existing probe by Britain's financial watchdog.

The Financial Conduct Authority (FCA) said in October it had joined other regulators around the world in scrutinising firms over the potential manipulation of the £3 trillion-a-day forex market.

The SFO said in a brief statement: 'The director of the Serious Fraud Office has today opened a criminal investigation into allegations of fraudulent conduct in the foreign exchange market.'

Regulators have been looking into whether currency traders shared information about their positions and knowledge of client orders through instant messages to rig the foreign exchange market in their favour.

Currency exchange rates are set on a daily basis by analysing trading volumes at leading banks during a short time window.

It is thought that traders could potentially influence exchange rates by pushing through large orders during the 60-second window to make a profit.

Even a small movement in exchange rates could affect the value of investments worldwide, including pension funds.

It threatens to engulf the industry in yet another embarrassing scandal at a time when many financial firms are still battling to restore their reputations following the Libor rigging revelations.

According to the Bank for International Settlements, global foreign exchange activity rose to 5.3 trillion dollars (£3.3 trillion) a day in 2013, from four trillion dollars (£2.5 trillion) in 2010.

London accounts for the bulk of currency trading, with 41% of global turnover in the market, followed by the United States, which has a 19% share, Singapore with 5.7%, Japan with 5.6% and Hong Kong with 4.1%.

Taxpayer-backed Royal Bank of Scotland has already said it has been contacted by the FCA over the issue and was 'co-operating fully'.

Chief executive Ross McEwan said last week that the the forex probe had the 'hallmarks' of being a more expensive scandal than Libor or payment protection insurance.

He told London's LBC radio station: 'We're still doing a lot of investigation. We're going through just millions and millions of emails, chat rooms, conversations, to see what actually went wrong, if anything, in this area.'