Recent investigations into alleged manipulation of foreign exchange rates could be used by politicians as an excuse for new regulation of the industry, the co-head of Denmark's Saxo Bank has warned.

Benchmark foreign exchange rates, often referred to as fixes, are a cornerstone of global financial markets, used to price trillions of dollars worth of investments and deals and relied upon by companies, investors and central banks.

Allegations of possible manipulation of these rates has prompted a global investigation.

Regulators in Switzerland, the United Kingdom and Hong Kong said last month they were investigating conduct in currency markets, while a top federal prosecutor in the United States said last week the U.S. Justice Department had launched a criminal probe.

"You could fear that the one market which regulators and politicians haven't got their teeth into yet is FX and, for sure, politicians can't wait to get their teeth into anything to do with financial markets," Lars Christensen, co-chief executive of Saxo Bank, said late on Saturday on the sidelines of the Formula One Abu Dhabi Grand Prix.

"So it could be what gives them the excuse to also get into the over-regulation of this market."

Copenhagen-based Saxo Bank is one of the biggest banks for retail forex trading, earning around two-thirds of its revenue from currency trading last year.

Christensen said there would have to be consequences if people were "deceitfully manipulating the rates" but it was a tough market to do so because of its size, the amount of liquidity and its transparency.

He said it was still too early to tell what kind of reputational damage the episode would have on the forex market generally and it was still unclear what the exact basis was for many of the trader investigations disclosed recently.

A string of banks, including JP Morgan and Citigroup , have put dealers on leave recently as regulators investigate possible manipulation in the $5.3 trillion-a-day foreign exchange market.

Barclays , UBS and Deutsche Bank said last week they were cooperating with regulators over possible manipulation of currency trading by banks, while Royal Bank of Scotland said it was reviewing its FX processes.

Deutsche Bank, Citigroup, UBS and Barclays are the four biggest players in the global FX market with a combined share of over 50 percent.

(Reporting by David French; Editing by Susan Fenton)