Daily turnover in NZ foreign exchange market falls as US dollar appreciates, interest rate swap turnover surges

New Zealand's foreign exchange market handled an average of US$10.6 billion daily in April, according to the Reserve Bank, with the NZ dollar falling one place to be the eleventh most traded currency globally with an average daily turnover of US$105 billion.  

The US$10.6 billion figure is down US$1.8 billion, or 15%, from the April 2013 daily turnover figure of US$12.4 billion. The figures come from a triennial survey co-ordinated by the Bank for International Settlements, the central banks' bank.

"The decrease in foreign exchange turnover (which is measured in US dollar terms) was largely the result of the appreciation of the United States dollar. In New Zealand dollar terms, average daily turnover rose 5.6%. Total global foreign exchange turnover fell from US$5.3 trillion to US$5.1 trillion per day over the past three years, but rose slightly on an exchange rate adjusted basis," Mark Perry, the Reserve Bank's head of financial markets, said. 

As the eleventh most traded currency, the Kiwi dollar has been overtaken by the Swedish krona, which is up to ninth. The top 10 most traded currencies in order are the US dollar, Euro, Japanese yen, British pound, Australian dollar, Canadian dollar, Swiss franc, Chinese yuan, Swedish krona, and Mexican peso.

Central banks and other authorities across 52 jurisdictions participated in the 2016 survey, with data collected from more than 1200 banks and other dealers. In New Zealand the survey used the activity of the five major banks participating in the local wholesale financial markets. 

"Foreign exchange spot turnover in New Zealand is dominated by trading-partner currencies such as NZD/USD, NZD/AUD, and USD/EUR. Together, this accounted for 65% of all local spot turnover in April 2016. Most foreign exchange trading occurs in major international financial centres and 93% of all New Zealand dollar turnover occurs offshore," Perry said. 

“In New Zealand, turnover in spot and forex derivatives markets fell, while forex swap turnover increased to 82% of total turnover. Average daily interest rate swap turnover in New Zealand rose by almost US$3.4 billion over the three years to April reaching US$4.9 billion. Perry said Overnight Indexed Swaps (OIS) were the main factor behind the increase in volume. 

"Gross turnover in the New Zealand foreign exchange market reported by survey participants totalled a shade under US$213 billion in April this year, with average daily turnover US$10.65 billion."

There's more detail from the Reserve Bank here, and the Bank for International Settlements' global report can be found here.

And Ambrose Evans-Pritchard reports at The Daily Telegraph here on how the US Federal Reserve is more powerful than at any time in history because 87.6% of the US$5.1 trillion in daily foreign exchange trades is done in the US dollar.