Australian Foreign Exchange Committee Meeting Minutes

Sydney – 26 March 2020
Conducted via teleconference

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Christopher Kent, RBA (Chair); Guy Debelle, RBA (GFXC Chair); Keith Sedergreen, ACI Australia; Mark McCarthy, AFMA; Jimmy Vouziotis, ANZ; Winnie Tan, Bank of China; David Hatzidis, CBA; Andrew Walsh, Citigroup; Lee Merchant, Deutsche Bank; David Kendrick, HSBC; Andrew Mourd, JP Morgan; Will Richardson, Macquarie Bank; Mark Lawler, National Australia Bank; Simon Watkin, NEX; Stuart Simmons, QIC; Gary Latner, Refinitiv; Simon Sukhaseume, SSGA; Graeme Edie, Westpac; Chris Knight, XTX Markets;


Simon Warner, AMP Philip Valvona, BHP Billiton


Matthew Boge, RBA (Secretary); Jason Griffin, RBA

1. Competition Guidelines

The Chair reminded attendees that the meeting would be conducted in line with the RBA's Competition Law Guidance.

2. Discussion of trading conditions in foreign exchange markets

The Global Foreign Exchange Committee (GFXC) Chair noted that the GFXC would shortly issue a Statement (26 March) regarding upcoming month-end flows. Due to recent large movements in exchange rates and underlying asset markets, month-end rebalancing flows may be greater than usual. Market participants were also facing operational constraints from measures to contain the spread of Covid 19. The GFXC would encourage market participants to give appropriate consideration to market conditions in managing their transactions.

In this context, members noted that, where mandates allowed, some hedging would occur ahead of the month-end in an effort to reduce a concentration of flows at peak times.

The member from Deutsche Bank provided an update on market functioning. Using a range of publicly sourced data, it was noted that volumes had been higher in recent weeks, but that measures of market liquidity (such as bid-offer spreads) had deteriorated sharply. Similarly, the member from SSGA noted spreads in the spot market were at least three times wider than usual and spreads in one-to-three month forwards were possibly five times wider than usual.

Members noted that liquidity remained fractured around 9am (Sydney) but improved once Japanese markets opened. Some members expressed the view that central bank actions – including the use of US dollar swap facilities – may improve market functioning.

Members also discussed credit and operational considerations. Large movements in exchange rates values could lead to increased usage of credit lines. The lockdown in various jurisdictions was discussed, including how it may affect those reliant on back office functions to be performed by staff in those jurisdictions.

3. General Business

The GFXC Chair noted that the GFXC’s working groups (on which several AFXC members were participating) were being suspended for the next couple of months, given work pressures arising from the current circumstances.

It was also noted that with the re-establishment of a swap facility with the Federal Reserve, the RBA was now conducting US dollar repo operations in the domestic market.

4. Next meeting

The next meeting would occur in late May, with the exact date to be confirmed later.

Australian Foreign Exchange Committee
March 2020