Hong Kong has ranked sixth in the global foreign-exchange market, and seventh in the global foreign-exchange and over-the-counter derivatives market, according to the latest Bank for International Settlements triennial survey results.

Monetary Authority Deputy Chief Executive YK Choi said the survey confirms that Hong Kong continues to build on its position as one of the world's major centres for foreign exchange and derivatives activities.

"Particularly notable from the survey is the significant increase in the trading volume of the Hong Kong dollar, due to the continuing sizeable inflow of capital to Mainland China through the Hong Kong foreign-exchange market. This highlights Hong Kong's important position as a gateway for investment in the Mainland."

Foreign exchange up 70.9%

Net daily turnover of foreign-exchange transactions rose 70.9% to US$174.6 billion in April, compared with three years previously. While spot transactions grew 6.4% to US$37.9 billion per day, net daily turnover of forward transactions more than doubled, to US$136.7 billion.

Forwards were mainly foreign-exchange transactions and a large proportion was of short maturity of less than seven days. Hong Kong dollar against US dollar remained the most heavily traded currency pair in the local market. 

Greater asset-management and hedge-fund activities in Hong Kong, a rise in bank treasury operations, and active carry trade activities were likely to have been the key factors behind the significant growth in these markets. Increasing China-related activities through the Hong Kong foreign-exchange market also stimulated growth.

Over-the-counter derivatives up 58.2%

Average daily net turnover of over-the-counter derivatives (both foreign exchange and interest-rate derivatives) rose 58.2% to US$23.6 billion. Strong growth was seen in both foreign-exchange derivatives and interest-rate instruments, particularly interest-rate swaps.

In contrast to the 38.2% drop in 2004, turnover in the Hong Kong dollar against the US dollar increased by more than 1.5 times this year. Its share to total net turnover rose from 7.2% in 2004 to 10.7% in 2007.

With regard to single-currency interest-rate derivatives, Hong Kong dollar-denominated contracts rose by 2.3 times to account for the largest share of the net turnover in 2007 while other major currencies registered declines.