Getting to Know the NZD.

The New Zealand dollar is nicknamed “Kiwi.”It’s a bird! It’s a plane! No, wait, it’s really a bird.

The Kiwi also happens to be the national symbol for New Zealand… but let’s focus on the Kiwi as a currency and its interesting characteristics.

Show me the commodities!

Since New Zealand’s economy is mostly dependent on its exports of commodities and agricultural products, the overall economic performance of the region is linked to commodity prices.

If commodity prices rise, then the amount of money paid for New Zealand’s exports also rises, which then makes a larger contribution to the country’s GDP.

Since a higher GDP reflects a strong economic performance, it could lead to an appreciation of the Kiwi.

Conversely, falling commodity prices result in a lower monetary value of exports, making a smaller contribution to GDP.

A lower GDP could then cause the Kiwi to depreciate.

I move hand-in-hand with the AUD

Since Australia is New Zealand’s number one trade partner, the economic performance of Australia has a huge impact on New Zealand’s.

For instance, when the Australian economy does well, Australian firms pump up their importing activities, and guess who benefits from that?

New Zealand, of course!

…and, just like the AUD, I enjoy carry trades!

Just like Australia, New Zealand enjoys higher interest rates compared to other major economies, such as the U.S., the U.K., or Japan.

Interest rate differentials between economies often serve as indicators of money flows.

Since investors prefer to receive higher returns, they’d sell lower-yielding investments in exchange for higher-yielding assets or currencies.

In other words, the higher the interest rate, the more money flows in.

I’d like more migration, please.

Because New Zealand’s population is less than half the number of people living in New York City, an increase in migration into the country has a huge effect on the economy.

This is because as the population grows, the demand for goods and overall consumption increases.

Oh, I’m weather-sensitive too.

New Zealand’s economy is also largely driven by its agricultural industry, which means that severe weather conditions such as droughts have a huge negative impact on their entire economy.

Those heatwaves are also prevalent in Australia, which is more frequented by forest fires, costing close to 1% of its GDP in damages. This doesn’t do the NZD any good…

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