Bulletin article discusses the New Zealand dollar in global markets

Release date
15 November 2017

An article published today in the Reserve Bank Bulletin examines the reasons why turnover in global foreign exchange (FX) has declined in the past three years, largely on the back of a decline in spot trading.

The slowdown in global turnover has been attributed to structural factors, such as regulatory changes and an associated decline in market makers’ risk appetites.

The New Zealand dollar remains highly traded, particularly relative to the size of the domestic economy, says author Michael Callaghan. The Bulletin discusses some factors that contribute to New Zealand dollar turnover. For example, New Zealand’s open capital markets allow market participants to invest through NZ dollar assets as a trading proxy for agricultural commodities.

Turnover in the foreign exchange market also facilitates the funding of the New Zealand economy, as banks and businesses use FX instruments to borrow offshore and hedge exchange rate risk. The most popular instrument used to trade the New Zealand dollar remains the FX swap, which are used by banks to manage foreign exchange risk and by the RBNZ to manage liquidity.

More information
Read the Bulletin - The New Zealand dollar in global markets

Media contact:
Angus Barclay, External Communications Adviser
Ph 04 471 3698 or 027 337 1102. angus.barclay@rbnz.govt.nz