Table of Contents
- What Is the NZD (New Zealand Dollar)?
- Key Takeaways
- Understanding the NZD (New Zealand Dollar)
- Fast Fact
- More on NZD History
- NZD/USD
- Important Note
- Factors Affecting NZD
- What Is the Abbreviation for New Zealand Currency?
- Why Is the NZD So Strong?
- Are New Zealand Dollars One of the Best Currencies To Trade?
- What Does New Zealand’s Currency Look Like?
What Is the NZD (New Zealand Dollar)?
Let me tell you about the New Zealand dollar (NZD), which is the official currency of New Zealand. It's divided into 100 cents and you'll often see it represented by the symbol $ or NZ$ to distinguish it from other dollar-based currencies. The NZD is also used in places like the Cook Islands, Niue, Tokelau, and the Pitcairn Islands.
Key Takeaways
You should know that the New Zealand currency is called the New Zealand dollar (NZD). New Zealand used the British system of pounds, shillings, and pence until 1967, when it switched to a dollar-based system. The NZD experienced several changes in its fixed exchange rate with the U.S. dollar until March 1985, when it was allowed to float freely. Since 1999, the New Zealand government has been producing polymer or plastic versions of the NZD, making the notes more secure against counterfeiting.
Understanding the NZD (New Zealand Dollar)
Decimalization of the NZD, meaning its division into 100 cents, happened in 1967 when the New Zealand dollar replaced the New Zealand pound at a rate of two dollars to one pound. It was initially pegged to the United States dollar and went through various fixed exchange rate changes until March 1985, when it started floating freely.
New Zealand's currency has a history spanning over 160 years. In the 1800s, New Zealand used its own coins and banknotes even before British currency became legal tender. It wasn't until 1933 that New Zealand issued its first official coins, based on the British pound, shilling, and pence.
Those first coins featured native New Zealand birds on the tails side, a tradition that continues today, with the British monarch on the heads side.
Fast Fact
The NZD is affectionately known as the 'Kiwi,' named after the flightless bird that's depicted on one side of the country's $1 coin.
More on NZD History
In 1934, the Reserve Bank of New Zealand was established as the sole supplier of banknotes. The original notes included designs like a kiwi, the nation's Coat of Arms, Maori King Tawhiao, and Fiordland's Mitre Peak.
It took another 30 years for the Reserve Bank to replace pounds, shillings, and pence with dollars and cents. In 1967 alone, the bank printed 27 million new banknotes and 165 million new coins.
The NZD has a history of colorful and vibrant designs, and since its first issuance, the printed designs have changed several times. In 1992, images of Queen Elizabeth on the banknotes were replaced with prominent New Zealanders like Edmund Hillary, Kate Sheppard, Apirana Ngata, and Ernest Rutherford, along with local birds and plants on the reverse sides.
Since 1999, the government has produced polymer versions of the NZD, which are more secure against counterfeiting and last longer. These polymer notes are estimated to last four times longer than regular paper notes and can even survive a washing machine without damage. The most recent update in 2016 added brighter colors and enhanced security features.
NZD/USD
The NZD/USD pair is quoted as 1 New Zealand dollar per X U.S. dollars. For instance, if it's trading at 1.50, that means it takes 1.5 U.S. dollars to buy 1 New Zealand dollar.
This pair is influenced by factors affecting the value of the NZD or USD relative to each other and other currencies. The interest rate differential between the Reserve Bank of New Zealand (RBNZ) and the Federal Reserve (Fed) plays a key role. If the Fed strengthens the USD through open market activities, the NZD/USD value could decline due to the stronger USD.
Important Note
The NZD/USD tends to have a positive correlation with the Australian dollar (AUD/USD).
Factors Affecting NZD
The NZD is seen as a carry-trade currency because it's relatively high-yielding, so investors often buy NZD and fund it with lower-yielding currencies like the Japanese yen or Swiss franc. This was evident during the financial crisis when high-yielding currencies like the NZD fell in 2008 and 2009. Margin trading in NZD/JPY rose in 2007-08 due to interest rate differentials, but positions dropped nearly 90% during the 2008 market turbulence.
Other factors include dairy prices and tourism. New Zealand is a major exporter of whole milk powder, so rising milk prices boost the economy and the currency. Tourism is a key economic driver, so higher visitor numbers strengthen the economy and appreciate the NZD.
What Is the Abbreviation for New Zealand Currency?
The abbreviation for the New Zealand currency is 'NZD.'
Why Is the NZD So Strong?
The strength of the NZD fluctuates, but overall, it's considered stable due to New Zealand's strong economy and outlook. Tourism drives the economy significantly, so good tourism performance strengthens the currency. Other factors like growth rate, GDP, unemployment, and inflation are robust, contributing to a strong NZD.
Are New Zealand Dollars One of the Best Currencies To Trade?
NZD is one of the most traded currencies globally, making it liquid in forex markets. New Zealand has high FX turnover relative to GDP because international traders seek yield, many companies and banks are internationally owned leading to currency swaps for risk management, exports and imports are a big part of the economy, and entities borrow heavily from international markets.
What Does New Zealand’s Currency Look Like?
Each NZD banknote and coin has a unique appearance. Typically, one side features a bird and the other an important historical figure from New Zealand. The currency uses very bright colors.
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