NZ dollar drops down world currency rankings

The Kiwi has fallen in the world's most traded currency rankings. Photo / File

The NZ dollar has dropped to 14th place in the world's most traded currency rankings from 10th, according to a Bank of International Settlements (BIS) survey.

The triennial survey took place in April and involved central banks and other authorities in 52 jurisdictions and more than 1200 banks and other dealers.

The NZD had held the number 10 spot since 2010, but has been overtaken by the Singapore dollar, Swedish krona, Korean won and Norwegian krone respectively, the survey showed.

The US dollar retained the number one spot — being on one side of 88 per cent of all foreign exchange (FX) trades — followed by the euro and the Japanese yen respectively.

The NZD was on one side of 1.7 per cent of all FX trades, or US$125 billion worth per day.
This compares to the NZD being on one side of 2.1 per cent of all FX trades or US$137b worth per day in April 2019.

Reserve Bank of NZ assistant governor and general manager of economics, financial markets and banking, Karen 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 restrictions, rising commodity prices, and geopolitical tensions following the Russian invasion of Ukraine.

"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," Silk said in a statement.

Trading in FX markets reached US$7.5 trillion per day in April 2022 according to BIS figures, up 14 per cent from US$6.6t three years earlier.

FX trading continued to be concentrated in the world's largest financial centres; the United Kingdom, the United States, Singapore, Hong Kong and Japan where 78 per cent of all foreign exchange trading takes place.

The United Kingdom remained the most important FX trading location globally, with 38 per cent of global turnover.

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

The most common currencies traded daily in New Zealand were the US dollar (US$9.6b), New Zealand dollar (US$8.4b), Australian dollar (US$1.4b), British pound (US$757 million), euro (US$431m) and the Japanese yen (US$243m).

The survey also captured over-the-counter interest rate derivatives, which averaged US$5.2t daily in April 2022, down from US$6.4t at the time of the April 2019 survey.

The decline reflected mainly the reduced turnover of forward rate agreements (FRAs) following the transition from the use of Libor as a reference rate at the end of 2021.