New Zealand Dollar General Info
The New Zealand dollar is informally called the ‘kiwi’ by foreign exchange traders and analysts due to the kiwi bird, which is native to New Zealand, being something of a national symbol for the country. The kiwi bird is also depicted on New Zealand’s one-dollar coin.
Although the New Zealand dollar is considered one of the eight FX ‘majors’, it is actually only the world’s eleventh most traded currency. Apart from the other seven majors – the US dollar, euro, yen, pound, Australian dollar, Canadian dollar and Swiss franc – the New Zealand dollar’s share of the foreign exchange market (around 2%) also falls behind that of the Mexican peso, the Chinese yuan and the Swedish krona. The currencies of China and Mexico are not considered majors due to their emerging market status, while the krona’s share of the market has only exceeded that of the New Zealand dollar fairly recently (in 2016, according to the Bank for International Settlements) and so is not yet considered ahead of New Zealand’s currency.
In the past two decades, the New Zealand dollar’s lowest value against the US dollar occurred in October 2000 when the NZD/USD exchange rate traded at just 0.3901. The currency’s two-decade high occurred in August 2011 when NZD/USD reached 0.8842, although it could be said that this high valuation was achieved twice, because in July 2014 the exchange rate reached 0.8836, just several pips shy of that achieved in 2011.
Among the majors, the New Zealand dollar is considered a riskier currency, which means that its value will fall against the larger majors (especially JPY, USD, CHF, GBP and EUR) during periods of economic uncertainty or when global geopolitical risk is elevated, or during bouts of high market volatility.NZD Foreign Transfers NZD Travel Money
New Zealand Dollar - Recent Performance
On October 19th, NZD tumbled in value following the news that New Zealand would be led by a Labour government for the first time in nine years, with Jacinda Ardern at the helm.
All had hung on the New Zealand First party’s decision of who to support (the Nationals or Labour) in a coalition following an inconclusive outcome to September’s general election.
After NZ First sided with Labour, NZD fell to a five-month low against USD of 0.697, and to eighteen-month and twenty-month lows against AUD and EUR of 0.889 and 0.589 respectively.
Investors typically dislike political change if deemed unnecessary and so October’s news didn’t sit well.
Furthermore, due to its policies, the mere involvement of NZ First in any coalition displeases investors. The party campaigns on restricting immigration and foreign investment and would like to alter the mandate of the RBNZ to focus less on inflation and more on foreign exchange markets. With that said, New Zealand's currency might have been more resolute had Labour won power via an elected majority.
After the surprising election outcome, it’s unlikely that ABN Amro will be sticking to its forecast for NZD/USD to rise to 0.82 in 2018. The bank predicted as much in September, citing “strong conviction” on future USD weakness, future commodity price rises and potential RBNZ rate hikes as its reasons.