November 29, 2022
The Rand still in the top 20 most traded currencies in the world
In October, the Bank of International Settlements and 52 other central banks and monetary authorities conducted the latest triennial survey of turnover activity in the foreign exchange (FX) and over-the-counter (OTC) derivatives markets which you can find here. Sales desks of reporting dealers, irrespective of where a trade is booked, report the turnover data and there’s a mine of information worth going through. Here are a few highlights that stood out for us.
First, as in previous FX surveys, respondents’ data show that the U.S. dollar remains the kingpin of all currencies. The three years since the previous BIS survey have been marked by a slide and then strong recovery in the US dollar, which remains the world’s preeminent currency. It is part of 88% of all currency trades (as there are two currencies involved in each trade), which is slightly greater than it was in 2010. The Euro has dropped over that period while the most significant increase in trading volume, as might be imagined, is in the Chinese yuan. Emerging market economies (EMEs)’ continued to gain FX market share; with the South African Rand cementing its position as part of the top 20 most traded currencies in the world. In addition to trading in domestic FX markets, countries’ currencies also trade in offshore markets. In the case of South Africa, the Rand trades extensively offshore. According to the BIS, 80% of global trading in the rand is conducted offshore, similar to the Brazilian Real and other selected emerging market currencies.
Source: BIS Triennial Central Bank Survey 2022
Second, there are no signs yet that de-globalisation is taking hold on a global level. The world economy has generally grown at a disappointing rate over the last decade, and the Global Financial Crisis was predicted by many at the time to lead to “de-financialisation” — a steady reduction in the amount of trust placed in markets. It hasn’t happened. Total turnover has now reached $7.5 trillion each day in foreign exchange markets. In a year, that implies total turnover of not far short of $2,000 trillion, or to give its proper name, $2 quadrillion. The world’s total gross domestic product for this year is expected to come in a little above $100 trillion. There’s an awful lot of trading going on, and it’s hard to see how anything like this amount is needed to cover the demands of trade or tourism.
Source: BIS Triennial Central Bank Survey 2022
Third, geography and history still count for something. The United Kingdom, the United States, Hong Kong, Singapore, and Japan represent almost 80% of all foreign exchange trading globally. As a trading centre, the U.S. has fared less well, losing ground to London, which has shrugged off Brexit uncertainty to account for 43% of all activity. UK and Hong Kong FX trading grew by more than the global average. A significant rise in FX trading also took place in Mainland China; it is now the 10th largest FX trading centre; five years ago, it was in 16th place.
Source: BIS Triennial Central Bank Survey 2022
To find out more and speak to an expert in our specialist FX dealing team, email enquiries@currencypartners.co.za or call us on +27 21 203 0081.
SPEAK TO AN EXPERT
