Will the New Zealand Dollar continue to decline? NZD trend analysis and investment guide

New Zealand Dollar (NZD) is the official currency of New Zealand, also commonly referred to as the “Kiwi.” In 1985, New Zealand adopted a floating exchange rate system, with the currency exchange rate fluctuating according to market conditions. As one of the most traded currencies globally, the NZD/USD ranks among the top ten worldwide, with the current quote approximately at 1.5 USD per 1 New Zealand Dollar.

Why Has the Kiwi Been Depreciating?

From its historical high of 0.88 USD in 2014 to slightly above 0.5 USD today, the Kiwi has depreciated over 32% against the US dollar. The reasons behind this warrant in-depth analysis.

Export-Dependent Economic Structure Is the Main Factor

New Zealand is a typical export-oriented economy, with agricultural products, wool, and dairy accounting for over two-thirds of exports. This economic characteristic causes the Kiwi to move in tandem with commodity prices, hence it is called a “commodity currency.” When international markets see a decline in these product prices, the Kiwi also weakens.

Tourism Decline Weighs on the Economy

Tourism is another major pillar of New Zealand’s economy. After the outbreak of the pandemic, global tourist numbers plummeted, severely reducing tourism revenue, which exerted negative pressure on the Kiwi.

Federal Reserve Rate Hikes Push Up the Dollar

The Fed’s continued rate hikes have led to a strengthening dollar, while the Reserve Bank of New Zealand’s monetary policy remains relatively accommodative, widening the interest rate differential between the two countries. A stronger USD directly depresses the NZD/USD cross rate, leading to a relative depreciation of the Kiwi.

Global Uncertainty Intensifies

Any global sudden event can impact New Zealand’s export trade. Highly dependent on international markets, a global economic recession directly threatens its exports, keeping the Kiwi under continuous pressure.

How to View the Future Trend of the Kiwi?

According to major investment banks’ forecasts:

• In six months: NZD/USD may reach 0.594
• Within one year: Expected around 0.5934
• Within two years: Expected around 0.5885
• Within three years: Expected around 0.5834

From these data, the Kiwi may continue to face downward pressure in the long term. The Australian dollar, as a fellow commodity currency, also faces similar downside risks, but short-term movements depend on changes in monetary policies of both countries.

It is important to note that when global risk appetite improves and demand for commodities increases, the Kiwi may rebound. Investors should closely monitor the Federal Reserve and the Reserve Bank of New Zealand’s interest rate decisions, as well as international agricultural product prices.

How to Invest in the Kiwi? What Are Common Methods?

First: Kiwi Fixed Deposit

You can convert local currency into Kiwi through a bank and then place a fixed deposit. This is the most conservative method with the least risk, but returns are limited. The exchange rate and deposit interest rates fluctuate with the market, and final returns depend on interest income and exchange rate differences.

Second: Kiwi Funds

Invest in foreign exchange funds related to New Zealand managed by professional fund managers. This method involves higher risk and potential returns, suitable for investors with a certain risk tolerance.

Third: Kiwi Futures

Kiwi futures are traded on the Chicago Mercantile Exchange (CME), with the product code NE. Futures are margin trading instruments that allow for long and short positions but carry risks of forced liquidation and margin calls, requiring strict risk management.

Fourth: Contracts for Difference (CFD)

CFDs are contracts between buyers and sellers based on price movements of the underlying asset, without physical delivery. Compared to futures, CFDs require less margin, offer higher capital efficiency, and allow for two-way trading. For commodity currencies like the Kiwi, CFDs provide flexibility and are good tools for short-term trading.

Considerations When Converting Kiwi to RMB

Investors wishing to convert Kiwi to RMB should pay attention to the NZD/CNY exchange rate. Given the current environment of a weakening Kiwi, timing the conversion to RMB is crucial. It is advisable to convert during short-term rebounds or oversold conditions to obtain better exchange rates.

Popular Kiwi Currency Pairs

NZD/USD (Kiwi / US Dollar)

This is the most mainstream Kiwi trading pair, with ample liquidity and narrow spreads. It is most directly affected by the monetary policies, economic data, and political events of both countries.

GBP/NZD (British Pound / Kiwi)

A relatively less traded pair, with lower liquidity and potentially wider spreads, exhibiting higher volatility, requiring cautious risk control.

EUR/NZD (Euro / Kiwi)

The European Central Bank’s monetary policy is a key factor influencing this pair, indirectly affecting the exchange rate through inflation and interest rate changes in the Eurozone.

What Should Investors Focus on When Trading the Kiwi?

Traders should pay close attention to the following factors:

• New Zealand Export Data: Prices of agricultural and dairy products directly impact economic health
• Central Bank Rate Decisions: The Reserve Bank of New Zealand’s policy guidance determines short-term trends
• US Dollar Index: The strength or weakness of the USD is a major driver of Kiwi fluctuations
• Economic Calendar: Watch for releases of key economic indicators such as employment and GDP data from New Zealand

Overall, investing in the Kiwi requires understanding its characteristics as a commodity currency, tracking global economic cycles, and choosing appropriate investment tools within a reasonable risk management framework. For investors optimistic about New Zealand’s long-term prospects, current lows may present good entry points; for short-term traders, monitoring the USD trend and commodity prices will be more helpful.