NZ dollar holds place as 10th most traded currency

The New Zealand dollar continues to hold its own in the $6.6trillion global foreign exchange (FX) markets, a global survey by the Bank of International Settlements (BIS) shows.

The triennial survey, which involved central banks and authorities across 53 jurisdictions, involving close to 1300 banks, showed that the NZ dollar averaged $US136billion ($NZ214.8billion) in daily trades, compared to $US445billion for the AUD and $US844 billion for the GBP, the world's fourth most traded currency.

The NZ dollar has been the 10th most traded currency for the past nine years.

The US dollar is still the currency of choice, involved on one side of 88% of all forex transactions. The euro and the yen are at two and three respectively.

Reserve Bank assistant governor and general manager of economics, financial markets and banking Christian Hawkesby attributed New Zealand's high FX turnover to GDP ratio to the ability of non-residents to freely trade directly in the currency, as well as in New Zealand dollar-denominated financial instruments.

"The BIS survey is an interesting exercise which highlights that although our economy is relatively minor compared to the survey participants we are ranked against, the NZ dollar is traded with a disproportionate frequency in global forex markets."

The survey showed that FX trading continues to be concentrated in the world's largest financial centres.

Sales desk in five locations - the United Kingdom, the United States, Hong Kong SAR, Singapore and Japan - represent 79% of all FX trades.

At the same time the share of trading taking place in the US declined to 17% in 2019, from 20% in 2016.

In contrast, the share of trading in the UK rose by 6% percentage points to 43% of global FX activity for 2019.

New Zealand's foreign exchange market handled an average of $US9.5billion per day in April 2019, down from $US10.6billion in April 2016.

The most common currencies traded daily in New Zealand are the US dollar ($US8335million), NZ dollar ($US7241million), Australian dollar ($US1343million), Japanese yen ($US399million), euro ($US622million) and the British pound ($US277million).

The survey also captured over-the-counter interest rate derivatives, which averaged $US6.5trillion daily in April 2019, up markedly from $2.7trillion at the time of the April 2016 survey.

The increase has been attributed to increased hedging and positioning amid shifting prospects for growth and monetary policy.


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