Liquidity Provided in Foreign Exchange

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Liquidity Provided In Foreign Exchange

Sydney provides a deep and liquid foreign exchange market, with daily turnover of more than $35 billion, demonstrating how effectively the city has been able to exploit its time-zone advantage as the first market to open.

It now ranks seventh in international foreign exchange terms, with 8% of world turnover. About $18 billion is traded against the Australian currency and another $18 billion with third currencies.

Swap-related transactions account for $27 billion, and Australian dollar turnover offshore is just more than $13.5 billion.

Stability of government, a strong economy, and attractive interest rates during the mid- to late 1980s made the Australian dollar the sixth-most-traded currency in international markets.

Competitors' Positions

Neither Hong Kong nor Singapore permits international trading of its domestic currency.

The achievement of the Sydney foreign exchange market is all the more remarkable because of the relatively short time it has had to develop.

The system of exchange-rate management in Australia came under severe pressure in 1983. Domestic markets had by then been substantially deregulated, so that interest rates were market-determined.

However, the exchange rate was controlled by monetary authorities, leaving an uncomfortable imbalance in monetary management. …