Author Paul Holmes
The Australian Foreign Exchange Committee (AFXC) is a representative forum of the Australian foreign exchange market operating under the sponsorship of the Reserve Bank of Australia (RBA). Membership is drawn from the leading foreign exchange banks and also includes representatives from the Association Cambiste Internationale (ACI) and the Australian Financial Markets Association (AFMA). The Chairman is elected from the Committee and the RBA provides a permanent secretary to the Committee.
Daily trading volumes in the Australian foreign exchange market rose 5.0% in April 2012 from October 2011 in U.S. dollar terms, according to the data released by the Reserve Bank of Australia on Monday.
However, total average daily trading volumes (in all over-the-counter foreign exchange instruments in the Australian market (was US$175.7 billion in April, down 20% compared with a year earlier.
The Australian foreign exchange market is the seventh largest foreign exchange market in the world. The Australian dollar/US dollar exchange rate pair is the fourth most traded currency pair in the global market.
The Australian Foreign Exchange Committee publishes what they describe as a Semi-annual Report on Foreign Exchange Turnover. Average daily turnover has shrunk by a fairly significant 20% to $175.6 billion over the past twelve months according to the figures released today by the AFXC.
Judgements and assumptions can vary on such a fall, however, the one glaring conclusion is that without a doubt forex investment (as an investment class) has obviously lost a significant level of its appeal during the last twelve months. As to whether or not this is institutional and corporate reduction, or retail clients disappearing in increasing numbers will require further investigation. The semi-annual report from the Australian Foreign Exchange Committee compiles data from 26 financial institutions in Australia’s currencies market.
Volume in swaps, FX spot transactions and outright forwards in Australia rose 6.0% from October to US$170.2 billion but was approx. 19% lower year on year. The data for cross currency swaps and over the counter options revealed that the volume was US$5.5 billion in April, this is down 19% from October and 39% on year.
I would not place to much faith in AFXC reports –
They purely count the volume from the big 4 banks (ANZ, Westpac, CommBank, NAB) for their deliverable business – Of which market share has been eroded by niche providers. These banks often charge up to a 300 pip spread for any physical FX transaction so consumers have gone elsewhere for a more competitive offering.
No retail or margin FX volume is counted in AFXC reports.