Many people take great delight in trading forex pairs involving the New Zealand Dollar (NZD). Why is that? Because it floats as free as a “Kiwi” bird and can be a great mover.
Have you ever wanted to know more about New Zealand and what drives the New Zealand economy and the NZD? If you do, you’ve come to the right place.
I’m a New Zealander through and through. Recently we needed to research my family background for a school project and no matter how far back I looked we were still in New Zealand. That seems quite unusual in this day of globalization, mixing and mingling.
Does that make me an expert on the NZD? Well I’m no economist but after decades of living with my eyes wide open, there’s plenty of practical insight to share. So here it goes?
Fertile Grounds for Fresh Food
The main driver for the New Zealand economy is the awesome quality of food that we produce. You just need to travel around the country to see how blessed we are here with our fertile quality ground to know that we can produce well-nourished animals, fruit and vegetables. The variety of quality product is wide since weather conditions are so variable with pockets of optimum conditions in different parts of the country for different produce. Wine country is nestled together where the grapes thrive. Grass is plentiful for dairy animals in the North Island where the grass is usually lush and green all year round due to helpful weather conditions. Crystal clear spring water is plentiful in the South Island as it comes rushing down from the mountainous areas.
It’s no wonder that New Zealand currently has an awesome reputation for great quality food and Fonterra is a beast of company in New Zealand whose fortunes play a great part in New Zealand’s fortunes.
New Zealand is currently experiencing it’s best summer in years. Day after day of clear blue skies that melt into weeks. We’re already in autumn but the summer conditions still prevail to lift our spirits with ice creams at the beach and suntan lotion galore. Amongst all this festive sun there is concern for the fortunes of this year’s growing season with continued drought conditions reducing feed and dairy milk production.
What will be the effect? Who knows since maybe global prices for food will go up to offset the shortage? The drought does not just involve New Zealand. Australia’s had temperatures high enough to turn the population medium-rare too. Only time will tell.
A Tourists’ Playground For All
Another major driver of the economy is tourism. With such diverse country side and jaw dropping scenery it’s no wonder that people come here in droves to see our land.
When I went on a prolonged overseas trip for several months to view the world it made me appreciate it even more. It’s not just me because New Zealand is fast becoming a destination for making movies that’s greatly helped by the rise of film director Peter Jackson. If you were to visit the North Island, east of the South Island and west of the South Island you’d almost think you’d crossed the world with the difference in the landscape.
There’s plenty here in New Zealand for those adventure seeking lovers who want some adrenaline thrills. Most especially in picturesque Queenstown where you can bungy jump your heart out and have many near death experiences in jet boats and more to get the heart pumping to remind you that you’re alive.
The drought in New Zealand is bringing day after day of cloudless blue skies in Auckland, New Zealand’s largest city. It’s already autumn but the weather is still like mid-summer.
One day there were three cruise ships parked in Auckland with an estimated 8,000 passengers. The cloudless skies and hot days must surely make them feel blessed and keen to spend on our shores.
In fact the long summer is making New Zealanders feel like they’re on holiday every weekend. We’re all making the most of it. When the weather is great people usually feel great and that transfers into spending money.
Rebuilding our Fallen City Christchurch
On those sad and fateful days New Zealand’s 3rd largest city Christchurch fell down in an earthquake causing loss of life. What a shock that was seeing the city I was brought up in tumble to ruins and the residents frightened beyond comprehension.
New Zealand has a culture where just about everyone insures all the big risks and especially their house or business building. We have one of the highest rates of insurance in the world. So when Christchurch fell down most people were covered and our government picked up the bill for land that became unusable.
Most of the insurance burden is carried by companies elsewhere in the world. So when Christchurch is rebuilt, overseas insurance companies largely fund it.
The rebuilding of Christchurch is expected to be a key driver for the economy for some time irrespective of the outlook for the global economy or the performance of other sectors of New Zealand’s economy.
It takes time to rebuild a city.
A Candidate for a Carry Trade, so Sensitive to Interest Rate Changes
Let’s face it, for quite a while now New Zealand has been a country that offers some of the highest interest rates in the world. So what difference does that make?
It’s attractive to buy NZD because by holding it you can be paid a greater interest rate than most countries except for our neighbour Australia.
New Zealand is a commodity currency like Australia and Canada because of the large influence of our food produce on the country’s economy. When “risk” is on in the world and good feelings abound for the global outlook, these currencies typically increase in value.
When that happens the holder of the NZD is rewarded with an increase in the value of the underlying asset (the NZD) and the receipt of interest rather than payment of it.
The NZD is very sensitive to speculation about future interest rate changes. If the Reserve Bank of New Zealand comes out and suggests an interest rate change different from the market consensus, the currency can make a rapid move to price it in.
New Zealand is a friendly peace loving country that has stable relations with other nations. Bounded by sea on all sides it is clear where the country’s boundaries lie and they thankfully remain unchallenged.
New Zealand’s blessed natural landscape for great food production and as an attractive travel destination helps make New Zealand an good proposition for the purchase of its currency. This helps drive its value.
New Zealand is a very ethical country with strong honest values and a hard working population. This strong ethical culture makes it a place that people can have confidence in when they invest here.
With a free floating but relatively stable currency and economy the New Zealand Dollar is an attractive currency.
Share your thoughts… (make a comment)
- Do you trade currency pairs involving the NZD in your portfolio?
- Which NZD pairs do you trade?
- What’s the lowest timeframe you trade the NZD?
- What are your thoughts on the NZD and the NZ economy?
Credit: Main photo courtesy of Rob Suisted www.naturespic.com
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About the Author: I’m Rachel Hunter, TraderRach, a Forex Trader who helps traders achieve the life they love with forex. Be strategic and design your trading business for sustainable success and have fun! That’s my mission. Join many traders’ gaining the edge with “10 Powerful Lessons for Forex Trading Success” plus other goodies. Years of precious learning specially packaged up for you. My background before trading is as a Chartered Accountant and Chief Financial Officer. I know what it takes to make a trading business rock on. It would give me great pleasure to make a difference to your success.