Trading volumes in Hong Kong’s foreign exchange market slowed

The challenge to Hong Kong’s International standing comes as the Bank for International Settlements, or BIS, reports that the city is the world’s fourth-largest foreign exchange market by value, The third largest OTC interest rate derivatives market and the world’s largest offshore renminbi business hub remained in the same position as in 2019, but with much slower growth, while OTC derivatives trading volumes were down even more, down 26% from three years ago. However, the Monetary Authority still believes that the rankings reaffirm Hong Kong’s status as a leading international financial center.

The BIS survey, conducted every three years, is compiled using transaction data from April of that year, when Hong Kong was in the midst of a fifth wave of the pandemic that was hitting economic activity, but trading in foreign exchange and renminbi continued to grow significantly, albeit at a slower pace. According to the announcement, the average daily value of foreign exchange transactions in Hong Kong has increased by 9.8% from US $632.1 billion in 19 years to US $694.4 billion this year. In 2019, deals were up 44.8% from three years earlier.

The growth rate of RMB foreign exchange trading nearly doubled, with the average daily value of RMB foreign exchange trading rising 77.7% from US $107.6 billion in 19 years to US $191.2 billion this year, according to the release. In 2019, the average daily value was up 39.6% from 2016.

The average daily value of OTC interest rate derivatives traded in Hong Kong dropped by 26.3 per cent from US $435.9 billion in 19 years to US $321.1 billion this year. This is a far weaker performance than in 2019, when Hong Kong’s average daily turnover in this area nearly tripled from 2016, and the city moved up one place in the international ranking to third in the world. The increase was largely driven by an increase in interest rate swaps trading, the authorities said.