* U.S. retail FX accounts fall to below 90,000 in 4th qtr * Subdued trading, regulations could force more brokers out By Wanfeng Zhou NEW YORK, Jan 22 (Reuters) - Retail currency trading, which had grown in popularity over the past decade, has cooled off in the United States in recent months as prolonged low market volatility and strict regulations dampened enthusiasm. The number of active U.S. retail foreign exchange traders -- those who traded or had an open position during a particular period -- fell to 89,577 in the fourth quarter of last year, according to Forex Magnates. That marked a 20 percent drop from about 110,000 two years ago, the forex news and trading research firm said. Forex brokers have been abandoning the U.S. market of late, with at least three quitting in the last six months and more expected to go. Analysts say brokers have grown reluctant to comply with tough U.S. regulations that govern retail forex trading, and have decided instead to focus on retail customers in regions with less strict rules or the unregulated institutional market. "U.S. regulations are extremely tough, making it difficult both for brokers and traders to keep operating in this market," said Michael Greenberg, CEO of Forex Magnates. "Eighteen brokers were accepting U.S. traders two years ago. Now there are only 11," he said. "It doesn't take a genius to predict that two years from now there will be only a handful of U.S. forex brokers left...if (any) at all." The U.S. Commodities Futures Traders Commission, in 2010, when it passed tougher regulations, said retail foreign exchange was the area the agency oversees where the most retail fraud occurred. Some firms run advertisements that tout high returns with little risk. Industry data shows that more than half to 75 percent of accounts lose money. The CFTC reduced the amount of borrowed money retail investors can use and stipulated a capital requirement for retail currency brokers of $20 million. Trading volume has declined. At FXCM, retail trading volume fell 5 percent to $3.6 trillion in 2012. Gain Capital, which has yet to release full-year figures, reported year-on-year declines in retail volumes for all of the first three quarters in 2012. U.S. brokers also saw a drop in retail forex funds, with the total amount of retail forex obligations falling to $742 million in November from $982 million in August, CFTC data showed. Alfonso Esparza, senior currency strategist at forex broker Oanda in Toronto, said the U.S. retail currency market has been consolidating since 2008. Meanwhile, interest in retail forex trading has picked up rapidly in London, China and the Middle East, analysts said. In December, Grand Rapids, Michigan-headquartered GFT shut its retail forex brokerage in the United States to focus on institutional business. Advanced Markets LLC, in Charlotte, North Carolina, and New York-based Forex Club also exited the U.S. retail currency market last year. Some brokers, such as Oanda and FXCM, said they remain committed to the U.S. market. FXCM said the exit of smaller players will help the firm gain market share.