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 - Market View
The New Zealand dollar rally lost steam in July and August.
The kiwi had been the best performing FX major in May and was second only to the Canadian dollar in June, having been supported by positive risk sentiment and strength in dairy prices. However, unlike other major central banks, investors have realised in recent months that there is little chance of the Reserve Bank of New Zealand hiking interest rates anytime soon and this has reversed the kiwi’s climb.
At its August meeting, the RBNZ maintained its previous interest rate forecast which showed no hike in New Zealand rates until the third quarter of 2019. New Zealand’s cash rate remains at a record low of 1.75%.
Following the RBNZ meeting, NZD/USD fell to 0.726 from highs above 0.755 in late July, and NZD/AUD fell to a three-month low of 0.92.
The RBNZ remains cautious on inflation which has slowed markedly in recent months. Inflation was non-existent in the second quarter (CPI growth of 0.0%), from growth of 1.0% in the first quarter.
Decision makers at the RBNZ are also less than thrilled about this year’s movement in the New Zealand dollar, which remains up more than 5% against the US dollar this year. In August, the bank expressed a desire for NZD to fall in order to help with inflation.
In July, a survey of business managers conducted by the RBNZ produced a median year-end forecast for NZD/USD of $0.71.
NZD/USD - 11:00 NZST
1 Day 1 Week: New Zealand Dollar was up against the United States Dollar with the NZD/USD at 0.7315, a rise of 1.09% but remains down for the last 7 days with a drop of -0.64%.
3 Month Trend: NZD/USD is trading higher in the 3-month range [Hi:0.7522, Lo:0.6908] and for the quarter is up 4.61%.