Foreign exchange and derivatives turnover survey

Release date
26 September 2007

New Zealand's foreign exchange market handled an average of US$13 billion per day in April 2007 (relative to US$7.5 and US$4.2 billion per day in April 2004 and April 2001 respectively), according to a Reserve Bank survey released today.

These results are part of a triennial survey of 54 central banks and monetary authorities co-ordinated by the Bank for International Settlements (BIS) and reported in US dollars. In New Zealand the survey captures the activity of the four major banks participating in the local wholesale financial markets.

Commenting on the survey, Deputy Governor Grant Spencer said "Since 2004, foreign exchange turnover in New Zealand has increased by almost 75%. About 15% of this increase is due to a rise in the New Zealand dollar, with the remainder due to growth in transaction volume. International data show a 71% increase in global foreign exchange turnover (including spot transactions, outright forwards and foreign exchange swaps).

"The increase in foreign exchange derivatives turnover (cross-currency swaps and foreign exchange options) in New Zealand was particularly strong, with a 330% rise in turnover since 2004."

The survey also covers interest rate derivative products, such as forward rate agreements and interest rate swaps. Average daily turnover in these products was US$2.9 billion – a 60% increase since 2004.

This press statement follows similar releases from the BIS and other central banks at 1500 GMT earlier today. More details of the results are contained in the attached information note. The BIS preliminary global report can be found at www.bis.org/press/p070925.htm.

For further information contact
Anthea Black
Communications Adviser
Ph 04 471 3767, 021 222 5225, anthea.black@rbnz.govt.nz

Summary of results from Foreign Exchange Market Survey – April 2007

Total gross turnover

  • Gross turnover in the New Zealand foreign exchange market reported by survey participants totalled US$234,127 million in the month of April 2007.
  • Average daily turnover was US$13,007 million.
  • Market analysis of total turnover:

Market

Average daily turnover US$m

Per cent of total

Spot

2,037

16

Forward

765

6

Swap

9,660

74

Derivatives

545

4

Total

13,007

100

  • Currency analysis of total turnover:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

7,195

55

USD/AUD

2,748

21

NZD/AUD

383

3

USD/EUR

1,133

9

USD/JPY

435

3

USD/GBP

380

3

Other

732

6

Total

13,007

100

Spot transactions

  • Gross spot turnover totalled US$36,663 million or 15.66 per cent of total turnover.
  • Average daily turnover was US$2,037 million.
  • Currency analysis of spot turnover:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

983

48

USD/AUD

259

13

NZD/AUD

203

10

USD/JPY

140

7

USD/EUR

198

10

USD/GBP

82

4

Other

171

8

Total

2,037

100

  • Analysis of spot turnover by counterparty:

Counterparty


Per cent of total

with reporting dealers



Local

6


Cross-border

50

Other financial institutions



Local

7


Cross-border

26

Non-financial customers



Local

11


Cross-border

0

Total


100

Forward transactions

  • Gross forward turnover reported by survey participants totalled US$13,761 million or 6 per cent of total turnover.
  • Average daily forward turnover was US$765 million.
  • Analysis of forward turnover by currency:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

276

36

NZD/AUD

95

12

USD/AUD

72

9

USD/JPY

57

7

USD/EUR

92

12

USD/GBP

52

7

Other

122

16

Total

765

100

  • Analysis of forward turnover by counterparty:

Counterparty


Per cent of total

with reporting dealers



Local

1


Cross-border

54

Other financial institutions



Local

15


Cross-border

0

Non-financial customers



Local

30


Cross-border

0

Total


100

Swap transactions

  • Gross swap turnover reported by survey participants totalled US$173,887 million or 74 per cent of total turnover.
  • Average daily swap turnover was US$9,660 million.
  • Analysis of swap turnover by currency:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

5,527

57

USD/AUD

2,406

25

USD/EUR

843

9

USD/GBP

245

3

USD/JPY

238

2

NZD/AUD

73

1

Other

329

3

Total

9,660

100

  • Analysis of swap turnover by counterparty:

Counterparty


Per cent of total

with reporting dealers



Local

3


Cross-border

60

Other financial institutions



Local

6


Cross-border

26

Non-financial customers



Local

3


Cross-border

3

Total


100

Maturity analysis of forward and swap transactions

  • Maturity analysis of forward and swap transactions by currency:

Currency pair

Per cent of swap and forward turnover


Up to 7 days

Between 7 days and 1 year

Over 1 year

NZD/USD

86

14

0

USD/EUR

99

1

0

USD/AUD

98

2

0

USD/JPY

99

1

0

USD/GBP

95

5

0

Synthetic transactions – foreign exchange

  • Gross turnover in foreign currency derivatives totalled US$9,816 million.
  • Average daily turnover was US$545 million.
  • Analysis of foreign exchange turnover by type:

Foreign exchange derivatives by type

Average daily turnover US$m

Per cent of total

Currency swaps

350

64

OTC options

196

36

Total

545

100

  • Analysis of foreign exchange derivatives turnover by currency:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

410

75

NZD/AUD

12

2

NZD/JPY

81

15

NZD/GBP

22

4

USD/AUD

11

2

Other

9

2

Total

545

100

Synthetic transactions – single currency interest rate

  • Gross turnover in single currency interest rate derivatives totalled US$51,965 million.
  • Average daily turnover was US$2,886 million.
  • Analysis of single currency interest rate derivatives turnover by type:

Single interest rate derivatives by type

Average daily turnover US$m

Per cent of total

Forward rate agreement

665

23

Currency swaps

2178

75

OTC options

44

2

Total

2887

100

Instrument definitions

The definitions used for traditional foreign exchange market instruments and OTC derivatives market instruments were the following:

Spot transaction: single outright transaction involving the exchange of two currencies at a rate agreed on the date of the contract for value or delivery (cash settlement) within two business days.

Outright forward: transaction involving the exchange of two currencies at a rate agreed on the date of the contract for value or delivery (cash settlement) at some time in the future (more than two business days later). This category also includes forward foreign exchange agreement transactions (FXA), non-deliverable forwards and other forward contracts for differences.

Foreign exchange swap: transaction which involves the actual exchange of two currencies (principal amount only) on a specific date at a rate agreed at the time of the conclusion of the contract (the short leg), and a reverse exchange of the same two currencies at a date further in the future at a rate (generally different from the rate applied to the short leg) agreed at the time of the contract (the long leg).

Currency swap: contract which commits two counterparties to exchange streams of interest payments in different currencies for an agreed period of time and usually to exchange principal amounts in different currencies at a pre-agreed exchange rate at maturity.

Currency option: Option contract that gives the right to buy or sell a currency with another currency at a specified exchange rate during a specified period. This category also includes exotic foreign exchange options such as average rate options and barrier options.

Forward rate agreement (FRA): interest rate forward contract in which the rate to be paid or received on a specific obligation for a set period of time, beginning at some time in the future, is determined at contract initiation.

Interest rate swap: agreement to exchange periodic payments related to interest rates on a single currency; can be fixed for floating, or floating for floating based on different indices. This group includes those swaps whose notional principal is amortised according to a fixed schedule independent of interest rates.

Interest rate option: option contract that gives the right to pay or receive a specific interest rate on a predetermined principal for a set period of time.