The trend of the New Taiwan Dollar continues to be under pressure. What factors should investors pay attention to?

New Zealand Dollar Trend Analysis: The Fate of Commodity Currencies

The New Zealand dollar (currency code: NZD), also known as the Kiwi, has adopted a flexible exchange rate system since 1985, no longer pegged to a basket of trade-weighted currencies. As one of the most traded currencies globally, NZD/USD ranks ninth in total currency pair trading volume worldwide. Currently, if this currency pair trades at 1.50, it means 1.5 USD is needed to exchange for 1 NZD.

In recent years, the Kiwi’s performance has been lackluster. According to market data, the NZD against the USD has fallen from its 2014 all-time high of 0.88 to above 0.5 USD, a depreciation of over 32%. There are deep economic factors driving this decline.

Four Major Drivers Behind the Kiwi’s Movement

Commodity Export Dependence

Australia and New Zealand are both export-oriented economies, mainly exporting bulk commodities such as coal, iron ore, copper, aluminum, and wool. Australia holds a dominant position in international trade. As a result, the AUD and NZD are called “commodity currencies”—currencies backed by physical assets besides government credit guarantees. Typical modern commodity currencies include the AUD, CAD, and NZD.

The Kiwi’s movement closely correlates with commodity prices, especially those of agricultural products, dairy, and wool, which are New Zealand’s main exports. Over two-thirds of New Zealand’s export revenue comes from these sectors, making its economic growth highly dependent on international price fluctuations.

Impact of Tourism Decline

Tourism is another pillar of New Zealand’s economy. After the global outbreak of the pandemic, the tourism industry was severely hit, with international visitors dropping sharply and foreign exchange income decreasing, directly dragging down the Kiwi’s exchange rate.

US Federal Reserve Rate Hikes

The NZD is also influenced by the USD exchange rate. When the Federal Reserve raises interest rates, the USD tends to strengthen, and the interest rate gap between the Reserve Bank of New Zealand and the Fed widens. The strong position of the USD relative to the NZD suggests that the NZD/USD cross rate may continue to face downward pressure.

Global Sudden Events Impact

As an export-driven economy, New Zealand is highly sensitive to global sudden events. Any disruption in international trade or economic shocks can directly impact the NZD’s movement, leading to sustained depreciation pressures.

NZD Forecast: What Lies Ahead in the Next Three Years

Emerging Bearish Risks

Due to slowing global economic growth, the NZD may enter a bear market in the long term. The AUD and NZD are both commodity currencies and tend to move together, rising and falling in tandem. However, recent charts show a dominant bearish sentiment, and a short-term downward trend may emerge.

According to forecasts from major investment banks, the outlook for NZD/USD is as follows:

• Within six months: possible testing of 0.594
• Within one year: expected to reach 0.5934
• Within two years: expected to decline to 0.5885
• Within three years: expected to hit 0.5834

Rebound Opportunity Analysis

The upward momentum of the NZD mainly stems from New Zealand’s economic growth, increased demand for local products, and expansion of GDP. Historical experience shows that when demand for risk assets is strong, commodity prices tend to rise, prompting investors to flow into gold and other commodities, while selling off low-yield USD, which can cause the NZD to rapidly appreciate against the safe-haven USD.

Currently, the USD demonstrates resilience amid market volatility. Traders should closely monitor key policy decisions from the Federal Reserve and the Reserve Bank of New Zealand.

Four Ways to Invest in the NZD Compared

Time Deposits

Exchange NZD at local bank’s posted rate to open a fixed-term deposit, then convert back to the home currency at maturity. The advantage is minimal risk and familiar operation, but returns are limited.

Fund Investment

NZD funds are managed by professional fund managers, investing directly in New Zealand dollars. Due to significant exchange rate volatility, the risk and return are relatively higher.

Futures Trading

NZD futures are a type of forex futures traded on the Chicago Mercantile Exchange (CME), with the product code NE. The minimum tick size is 0.0001, with a tick value of $10. Futures are margin products supporting two-way trading but carry risks of margin calls or liquidation, and physical delivery is required at expiration.

Contracts for Difference (CFD)

CFDs are derivative arrangements between buyers and sellers that do not involve physical delivery. Compared to futures, CFDs require less margin, offer higher capital efficiency, and can theoretically be held indefinitely. CFDs support two-way trading, offering high flexibility, making them especially suitable for short-term swing trading on the NZD to realize both long and short profits.

Mainstream NZD Trading Currency Pairs

Traders can focus on major NZD pairs such as: NZDUSD (NZD/USD), GBPNZD (GBP/NZD), EURNZD (EUR/NZD), AUDNZD (AUD/NZD), NZDJPY (NZD/JPY), NZDCHF (NZD/CHF), etc.

The overall trend of the NZD remains under pressure. Investors need to look for trading opportunities amid Federal Reserve policies, commodity prices, and New Zealand economic data.