New Zealand dollar falls to 14th most traded currency

Despite this, Kiwi currency still punches above its weight

New Zealand dollar falls to 14th most traded currency

The New Zealand dollar has fallen to the 14th most traded currency globally, according to a survey compiled by the Bank of International Settlements.

The survey took place in April and involved central banks and other authorities in 52 jurisdictions and more than 1,200 banks.

“The New Zealand dollar had held the 10th spot since 2010, however has been overtaken by the Singapore dollar, Swedish krona, Korean won and Norwegian krone respectively,” Reserve Bank assistant governor and general manager of economics, financial markets and banking Karen Silk.

“The US dollar retained the number one spot — being on one side of 88% of all foreign exchange (FX) trades, followed by the euro and the Japanese yen respectively. The Australian dollar placed sixth overall. The NZD was on one side of 1.7% of all FX trades, or USD$125 billion worth per day.”

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“This compares to the NZD being on one side of 2.1% of all FX trades or USD$137 billion worth per day in April 2019 when this survey was last conducted.”

Silk said the slide in the New Zealand dollar’s ranking came at a time of heightened foreign exchange volatility, with changing interest rate expectations, COVID-19 restrictions, rising commodity prices and geopolitical tensions following the Russia/Ukraine conflict.

“While being overtaken by some of our peers in a volatile period, the New Zealand dollar continues to trade with a disproportionate frequency relative to the size of the New Zealand economy,” she said.

“We found trading in FX markets reached USD$7.5 trillion per day in April 2022 according to BIS figures, which is up 14% from USD$6.6 trillion three years earlier. FX trading continues to be concentrated in the world’s largest financial centres being the United Kingdom (the most important FX trading location globally with 38% of global turnover), United States, Singapore, Hong Kong and Japan.”

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Silk said New Zealand's foreign exchange market handled an average of USD$10.6bn per day in April 2022, up from USD$9.3bn in April 2019.

“The most common currencies traded daily in New Zealand are the US dollar (USD$9.6 billion), New Zealand dollar (USD$8.4 billion), Australian dollar (USD$1.4 billion), British pound (USD$757 million), euro (USD$431 million) and the Japanese yen (USD$243 million),” she said.

“The survey also captured over-the-counter interest rate derivatives averaging USD$5.2 trillion daily in April 2022, down from USD$6.4 trillion at the last survey. The decline reflected mainly the reduced turnover of forward rate agreements, following the transition from the use of Libor [the London Inter-Bank Offered Rate – an interest-rate average calculated from estimates submitted by leading London banks] as a reference rate at the end of 2021.”