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Commerce Commission investigates currency trading amid global probe into manipulation

The Commerce Commission has an investigation underway into the foreign exchange market, amid a global probe into alleged manipulation of currency rates.

The New Zealand regulator's active investigation into the currency trading market comes as at least a dozen authorities in North America, Asia and Europe conduct inquiries into claims traders colluded with their counterparts at rival banks to set foreign exchange rates by sharing client information.

The Commerce Commission has an "investigation in that space," a spokeswoman told BusinessDesk. She declined to comment on the scope of the probe or any of the parties involved.

The New Zealand dollar was the world's 10th most traded currency with US$105 billion in average daily turnover in April 2013 and accounting for about 2 percent of the global US$5 trillion traded daily, according to the Bank for International Settlement. The bulk of trading in the kiwi occurs outside New Zealand.

The Australian Securities and Investment Commission joined the worldwide probe earlier this month, telling the Financial Times it would likely take a year to complete the investigation.

The Financial Markets Authority is aware of the international inquiries, and will "continue to monitor developments here and abroad, and to liaise with agencies in New Zealand, Australia and further afield," a spokesman said in an emailed statement.

Since the allegations of global market manipulation emerged in a Bloomberg report last year, about 30 foreign exchange traders have been suspended, put on leave, or fired, of which seven have come from Swiss bank UBS, the world's fourth-biggest currency trader, according to a Reuters report. Other firms reported to have suspended, put on leave, or fired staff include Citigroup, Royal Bank of Scotland Group, and Barclays.

Earlier this month the Bank of England, the UK central bank, suspended a staff member pending an internal review into allegations its employees were aware of the market manipulation.

The probe into foreign exchange trading comes after a similar investigation into fixing the London Interbank Offered Rate, the borrowing rate between lenders known as the Libor. That probe resulted in financial institutions paying some US$6 billion to settle civil and criminal claims.

(BusinessDesk)

Comments and questions
6

How can the public have confidence that NZ politicians at the highest levels are not involved in foreign exchange trading - either directly - or indirectly passing on tips to friends / family or business associates?

Who is checking?

How is this being checked?

Anyone else think that these are fair questions?

Penny Bright
'Anti-corruption /anti-privatisation Public Watchdog'

Nope Penny, I think they're naive questions if you have knowledge of the FX markets. What great source of knowledge have politicians (including an ex-FX trader) got in the FX markets to even think they have a choice in doing that, damn all. Sure check out the banks but I don't believe the same corrupt practices by a few overseas were followed here, but it doesn't hurt to be sure...but as far as trying to play politics with it shows a total lack of knowledge of the FX markets.

Policy
Ministry of Foreign Relations
Ministry of Primary Industries
Ministry of Customs
Ministry of Revenue

Fiscal
Treasury
NZDMO
NZECO

Monetary
RBNZ

The new currency pair was on the table ages ago, with a new currency pair like that that will mean we (and exporting cos) will be using way less USD, but don't hold your breath thinking cost savings are going to be passed onto counterparties - it's just more money for the men in the middle - remember - they have to do one less step in the contracts now = less compliance, less trade execution, less fee's etc.

The New Zealand dollar was the world's 10th most traded currency with US$105 billion in average daily turnover in April 2013 and accounting for about 2 percent of the global US$5 trillion traded daily, according to the Bank for International Settlement. The bulk of trading in the kiwi occurs outside New Zealand.

what does this tell us EXCEPT that NZ is an easily manipulated currency ?

?

Facts are, the more liquid it is (i.e. the more heavily traded) the less easy to manipulate a currency. Liquidity is a good thing in any market, and if that drys up, anyone with a small amount of ammunition would be able to punt it around.

No it isn't!

Liquidity is one thing, manipulation is another.

It's also worth mentioning - the amount of chinese debt on US balance sheet ......

This is what's going to happen:

China lends to America
America imports from China
If China calls debt = America to pay = economic downturn = less imports from china = less jobs for china manufacturing sector

China is timing/playing their cards and so is the US, and the thing I have to give Mr Key, is that he's good at playing the finance game. With the new currency pair we are no longer exposed as much to the USD's currency risk and China is our main trading partner.

If you can think of this as a financial transaction of sorts between economies while taking into account the driving factors behind FX rates, and then the factors behind those you'll see that liquidity does not necessarily mean the harder it is to manipulate an instrument.