The New Zealand dollar is now the world's 14th most traded currency, down from 10th where it had been since 2010, according to the Bank for International Settlements (BIS).
A survey by BIS, the central banks' bank, shows the Kiwi dollar has been overtaken by the Singapore dollar, Swedish krona, Korean won and Norwegian krone.
The US dollar retained the number one spot, being on one side of 88% of all foreign exchange (FX) trades, followed by the euro and the Japanese yen respectively. The NZ dollar was on one side of 1.7% of all FX trades, or US$125 billion worth per day. That's down from the NZ dollar being on one side of 2.1% of all FX trades, or US$137 billion worth per day, in April 2019.
“While being overtaken by some of our peers in a volatile period, the New Zealand dollar continues to trade with a disproportionate frequency relative to the size of the New Zealand economy,” says Karen Silk, Reserve Bank of New Zealand (RBNZ) Assistant Governor and General Manager of Economics, Financial Markets and Banking.
Silk notes the drop in the NZ dollar’s ranking comes at a time of heightened FX volatility, with changing interest rate expectations, COVID-19 restrictions, rising commodity prices, and geopolitical tensions following the Russian invasion of Ukraine. By law the RBNZ is the sole supplier of NZ banknotes and coins.
NZ's foreign exchange market handled an average of US$10.6 billion per day in April 2022, up from US$9.3 billion in April 2019. The most common currencies traded daily in NZ are the US dollar at US$9.6 billion worth, NZ dollar at US$8.4 billion, Australian dollar at US$1.4 billion, British pound at US$757 million, euro at US$431 million, and the Japanese yen at US$243 million worth.
"Trading in FX markets reached US$7.5 trillion per day in April 2022 according to BIS figures, up 14% from US$6.6 trillion three years earlier," the RBNZ says.
"FX trading continues to be concentrated in the world’s largest financial centres; the United Kingdom, the United States, Singapore, Hong Kong SAR and Japan where 78% of all foreign exchange trading takes place. The United Kingdom remained the most important FX trading location globally, with 38% of global turnover."
The survey also captured over-the-counter interest rate derivatives, which averaged US$5.2 trillion daily in April, down from US$6.4 trillion at the time of the April 2019 BIS survey. The decline reflected mainly the reduced turnover of forward rate agreements following the transition from the use of Libor as a reference rate at the end of 2021, the RBNZ says.
The triennial BIS survey was undertaken in April, involving central banks and other authorities in 52 jurisdictions and more than 1,200 banks and other dealers.
10 Comments
No I think its more of a reflextion of the concentration of liquidty in the Majors. The levels of automation supplying liqudity into dark pools etc, means that the systems/thus liquidity sits closer to these. The gap between bid/ask is incredibly narrow on the majors with most offering mids interbank via dark pools.
Where once there was a opportunity to make money across NZD, I think its become more transactional driven.
Personally I don't read to much into it.
The RBNZ is the sole supplier of all forms of government currency including central bank reserves which are created to finance the governments spending and so not only currency in the form of notes and coins.
Banks also create NZ Dollars when they lend but only as bank deposits and not as government currency. Banks do need the governments currency to operate their payment system though.
Do they create dollars? I suggest that they only issue credit, not actual cash. But they are betting on future economic activity and the value of their clients assets.
I think it is a myth to argue banks "create" money. But they are a problem when they issue too much credit without a structured direction.
I think more than semantics. It's actually a very important aspect. When one considers what sets the value of a currency, the amount being issued is an important component that would have an impact. So if banks were issuing money, not credit, there would be an impact. But when they issue credit the problem is different. Banks issuing credit a making bets on the future of the economy, where those they loan to must get money to pay for the credit they receive. Under a fractional banking system, the banks don't have to hold a dollar for every dollar they provide credit for. But they are sure vacuuming real dollars out of the economy when those loans get paid back. If the economy collapses, the bank loan documents ensure that any assets that are provided as security become owned by the bank. This like dice that are totally loaded against the bank.
The thing that is wrong about this is that it is supposed to be the Government regulating the amount of money in our economy, but the banks (foreign owned) are to all intents actually doing that by sucking so much out. This is to all intents undermining our economy.
The Reserve Bank supposedly controls the money supply through using monetary policy and setting interest rates. This causes boom and bust economic cycles and swings in things like house prices though and so not a very effective method to control the economy really .It's rather hopeless at controlling inflation also.
Banks only get back the money they created plus interest, once the money is repaid it no longer exists and so the banks are not sucking out money apart from their profits.
NZ runs large current account deficits which must be financed and according to sectoral balances this can only be achieved by increasing private debt or by the government running deficits.
This may point though to a more serious problem for New Zealand, that it's losing relevancy as a x colonial power and its importance on the world stage is dropping as other economies and countries become stronger. The NZ dollar may be seen by some now as a lot less valuable to hold and use.
NZ has never had any relevancy on the world stage. It’s a small country with a small population located at the bottom of the planet. It lacks any geographical strategic importance. It’s has no military capability of any significance. It’s a primary produce exporter with no significant mineral or energy commodities. And its ANZUS ties are not what they were even thirty years ago. Don’t misunderstand me, I think NZ is a lovely country, happily with a stable democratic system , and sufficient natural resources and a welfare system that by and large looks after the majority of its population. It still ranks as a great place to live. (I’m a kiwi that has lived for many years, in Europe, UK, Japan and now Australia and have travelled through every world continent). But to imagine that NZ has any importance on the world stage, economically, or geopolitically is delusional. Kiwi’s should be grateful that by and large their location and smallness renders them ignorable by much of the world. It’s not a bad position to be in.
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