Foreign exchange and derivative turnover survey

Release date
01 September 2010

New Zealand's foreign exchange market handled an average of US$9.5 billion per day in April 2010 (relative to US$13 billion, US$7.5 and US$4.2 billion per day in April 2007, April 2004 and April 2001 respectively), according to a Reserve Bank survey released today.

These results are part of a triennial survey of 53 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 five major banks participating in the local wholesale financial markets.

Commenting on the survey, Head of Financial Markets Simon Tyler said: "Since 2007, foreign exchange turnover in New Zealand has decreased by almost 31%. Much of the decline is due to a fall in foreign exchange swap transaction volume, only a modest 3% is due to a fall in the New Zealand dollar versus the United States Dollar since April 2007. This contrasts sharply with international data which show a 20% increase in global foreign exchange turnover (including spot transactions, outright forwards and foreign exchange swaps) to $4.0 trillion per day from $3.3 trillion in April 2007.

"The decrease in foreign exchange derivatives turnover (cross-currency swaps and foreign exchange options) in New Zealand mirrored that in the non-derivatives, with a 33% fall in turnover since 2007.

"The survey also covers single currency interest rate derivative products, such as forward rate agreements and interest rate swaps. Average daily turnover in these products was US$1.6 billion – a 45% decrease since 2007.

"Overall, the falls in transaction volumes in New Zealand and the New Zealand dollar have been mainly driven by less overseas interest in the New Zealand dollar and a shift from short to longer-term funding by New Zealand's banks."

This news release follows similar releases from the BIS and other central banks at 0100 CEST today. More details of the results are contained in the attached information note. The BIS preliminary global report can be found at http://www.bis.org/publ/rpfx10.htm.

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

Summary of results from foreign exchange turnover survey – April 2010

Total gross turnover

  • Gross turnover in the New Zealand foreign exchange market reported by survey participants totalled US$189,197 million in the month of April 2010.
  • Average daily turnover was US$9,460 million.
  • Market analysis of total turnover:

Market

Average daily turnover US$m

Per cent of total

Spot

1,607

17

Forward

687

7

Swap

6,975

74

Derivatives

191

2

Total

9,460

100

  • Currency analysis of total turnover:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

5,865

62

USD/AUD

770

8

NZD/AUD

544

6

USD/EUR

572

6

USD/JPY

552

6

USD/GBP

632

7

Other

525

5

Total

9,460

100

Spot transactions

  • Gross spot turnover totalled US$32,149 million or 17 per cent of total turnover.
  • Average daily turnover was US$1,607 million.
  • Currency analysis of spot turnover:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

658

41

USD/AUD

229

14

NZD/AUD

290

18

USD/JPY

43

3

USD/EUR

175

11

USD/GBP

98

6

Other

114

7

Total

1,607

100

  • Analysis of spot turnover by counterparty:

Counterparty


Per cent of total

With reporting dealers



Local

9


Cross-border

33

Other financial institutions



Local

7


Cross-border

40

Non-financial customers



Local

11


Cross-border

0

Total


100

Forward transactions

  • Gross forward turnover reported by survey participants totalled US$13,735 million or 7 per cent of total turnover.
  • Average daily forward turnover was US$687 million.
  • Analysis of forward turnover by currency:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

178

26

NZD/AUD

147

21

USD/AUD

113

17

USD/EUR

67

10

USD/GBP

21

3

USD/JPY

17

2

Other

144

21

Total

687

100

  • Analysis of forward turnover by counterparty:

Counterparty


Per cent of total

With reporting dealers



Local

0


Cross-border

45

Other financial institutions



Local

16


Cross-border

8

Non-financial customers



Local

31


Cross-border

0

Total


100

Swap transactions

  • Gross swap turnover reported by survey participants totalled US$139,493 million or 74 per cent of total turnover.
  • Average daily swap turnover was US$6,975 million.
  • Analysis of swap turnover by currency:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

4,847

70

USD/GBP

513

7

USD/JPY

492

7

USD/AUD

428

6

USD/EUR

330

5

NZD/AUD

100

1

Other

265

4

Total

6,975

100

  • Analysis of swap turnover by counterparty:

Counterparty


Per cent of total

With reporting dealers



Local

18


Cross-border

23

Other financial institutions



Local

6


Cross-border

50

Non-financial customers



Local

3


Cross-border

0

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

84

16

0

USD/EUR

93

7

0

USD/AUD

77

23

0

USD/JPY

99

1

0

USD/GBP

92

8

0

Synthetic transactions – foreign exchange

  • Gross turnover in foreign currency derivatives totalled US$3,820 million.
  • Average daily turnover was US$191 million.
  • Analysis of foreign exchange turnover by type:

Foreign exchange derivatives by type

Average daily turnover US$m

Per cent of total

Currency swaps

143

75

OTC options

48

25

Total

191

100

  • Analysis of foreign exchange derivatives turnover by currency:

Market

Average daily turnover US$m

Per cent of total

NZD/USD

182

95

Other

9

5

Total

191

100

Synthetic transactions – single currency interest rate

  • Gross turnover in single currency interest rate derivatives totalled US$32,210 million.
  • Average daily turnover was US$1,611 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

840

52

Currency swaps

751

47

OTC options

20

1

Total

1611

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.