Foreign exchange and derivative turnover survey

Release date
06 September 2013

New Zealand's foreign exchange market handled an average of US$12.4 billion per day in April 2013 according to a Reserve Bank survey released today. This is greater than the April 2010 turnover figure of US$9.5 billion but remains below the high reached in April 2007.

Commenting on the survey, Head of Financial Markets Mark Perry said: "The appreciation of the New Zealand dollar accounts for around two-thirds of the increase in foreign exchange turnover (which is measured in USD terms). In New Zealand dollar terms, average daily turnover rose 10.3 percent. Global foreign exchange turnover rose from US$4.0 trillion to US$5.3 trillion per day over the past three years.

These results are part of a triennial survey co-ordinated by the Bank for International Settlements (BIS) and reported in US dollars. In New Zealand, the survey captured 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 Asia-Pacific currencies such as NZD/USD, USD/AUD, NZD/AUD, and USD/JPY. Together, this accounted for 84 percent of all local spot turnover in April 2013.

Most foreign exchange trading occurs in major international financial centres. NZ dollar turnover accounts for one percent of global turnover, and 91 percent of all New Zealand dollar turnover occurs offshore."

"Turnover in derivative products is also reported, with average daily cross currency basis swap turnover in New Zealand increasing by US$701 million over the past three years to US$844 million. This reflects a variety of factors, including local banks' preferences to increase the duration of funding in response to the Global Financial Crisis (and in order to meet domestic prudential liquidity requirements), as well as a notable increase in New Zealand dollar-denominated bond issuance by offshore parties."

More details of the results are included below and the BIS preliminary global report can be found on the BIS website: Central Bank FX Survey.

For further information, contact:
Angus Barclay
External Communications Adviser
Ph 04 471 3698, 027 337 1102

angus.barclay@rbnz.govt.nz

Summary of results from foreign exchange turnover survey – April 2013

Total gross turnover

  • Gross turnover in the New Zealand foreign exchange market reported by survey participants totalled US$248,107 million in the month of April 2013.
  • Average daily turnover was US$12,405 million.
  • Market analysis of total turnover:

Market

Average daily turnover US$m

Percent of total

Spot

2,208

18

Forward

804

6

Swap

8,527

69

Derivatives

867

7

Total

12,405

100

  • Currency analysis of total turnover:

Market

Average daily turnover US$m

Percent of total

NZD/USD

8,551

69

USD/AUD

933

8

NZD/AUD

677

5

USD/EUR

797

6

USD/JPY

469

4

USD/GBP

240

2

Other

738

6

Total

12,405

100

Spot transactions

  • Gross spot turnover totalled US$44,154 million or 18 percent of total turnover.
  • Average daily turnover was US$2,103 million.
  • Currency analysis of spot turnover:

Market

Average daily turnover US$m

Percent of total

NZD/USD

1,181

53

USD/AUD

223

10

NZD/AUD

302

14

USD/JPY

148

7

USD/EUR

79

4

USD/GBP

33

1

Other

243

11

Total

2,208

100

  • Analysis of spot turnover by counterparty:

Counterparty


Percent of total

With reporting dealers



Local

5


Cross-border

28

Other financial institutions



Local

7


Cross-border

20

Non-financial customers



Local

39


Cross-border

0

Total


100

Forward transactions

  • Gross forward turnover reported by survey participants totalled US$16,079 million or 6 percent of total turnover.
  • Average daily forward turnover was US$804 million.
  • Analysis of forward turnover by currency:

Market

Average daily turnover US$m

Percent of total

NZD/USD

459

57

NZD/AUD

135

17

USD/AUD

17

2

USD/EUR

3

0

USD/GBP

1

0

USD/JPY

26

3

Other

163

20

Total

804

100

  • Analysis of forward turnover by counterparty:

Counterparty


Percent of total

With reporting dealers



Local

6


Cross-border

8

Other financial institutions



Local

31


Cross-border

2

Non-financial customers



Local

53


Cross-border

0

Total


100

Swap transactions

  • Gross swap turnover reported by survey participants totalled US$170,540 million or 69 percent of total turnover.
  • Average daily swap turnover was US$8,527 million.
  • Analysis of swap turnover by currency:

Market

Average daily turnover US$m

Percent of total

NZD/USD

6,093

71

USD/GBP

206

2

USD/JPY

295

3

USD/AUD

688

8

USD/EUR

706

8

NZD/AUD

229

3

Other

310

4

Total

8,527

100

  • Analysis of swap turnover by counterparty:

Counterparty


Percent of total

With reporting dealers



Local

7


Cross-border

63

Other financial institutions



Local

3


Cross-border

22

Non-financial customers



Local

5


Cross-border

0

Total


100

Maturity analysis of forward and swap transactions

  • Maturity analysis of forward and swap transactions by currency:

Currency pair

Percent of swap and forward turnover


Up to 7 days

Between 7 days and 1 year

Over 1 year

NZD/USD

79

20

1

USD/EUR

92

8

0

USD/AUD

76

23

1

USD/JPY

90

10

0

USD/GBP

72

28

0

Synthetic transactions – foreign exchange

  • Gross turnover in foreign currency derivatives totalled US$17,335 million.
  • Average daily turnover was US$867 million.
  • Analysis of foreign exchange turnover by type:

Foreign exchange derivatives by type

Average daily turnover US$m

Percent of total

Currency swaps

844

97

OTC options

22

3

Total

867

100

  • Analysis of foreign exchange derivatives turnover by currency:

Market

Average daily turnover US$m

Percent of total

NZD/USD

818

94

Other

49

6

Total

867

100

Synthetic transactions – single currency interest rate

  • Gross turnover in single currency interest rate derivatives totalled US$57,625 million.
  • Average daily turnover was US$2,881 million.
  • Analysis of single currency interest rate derivatives turnover by type:

Single interest rate derivatives by type

Average daily turnover US$m

Percent of total

Forward rate agreement

1,354

47

Currency swaps

1,527

53

OTC options

0

0

Total

2,881

100

Instrument definitions

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

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.