New Zealand Exchange Rate

New Zealand

New Zealand Dollar weakens to six-year-low in mid-July

The New Zealand dollar (NZD) depreciated to 0.66 NZD per USD on 16 July, which represented a 5.7% depreciation over the value on the same day of the previous month and was 24.4% weaker than on the same day of the previous year. The Kiwi has not been this weak since mid-July 2009. The currency has been on a depreciating trend since it hit a multi-year high in early July of last year. The pace of depreciation became sharper starting in May.

The significant New Zealand dollar’s depreciation over the course of the last few months mainly resulted from a surprisingly sharp slump in dairy prices, as dairy products are New Zealand’s main exports and principal source of foreign currency. Prices at the GlobalDairyTrade auction fell to a six-year low in July as demand wains while global supplies remains robust, raising fears that prolonged weakness of the external sector could weaken the whole economic dynamic of the country. Expectations that the U.S. Federal Reserve would increase interest rates in the near future added to the depreciation.

The Reserve Bank of New Zealand’s (RNBZ) most recent monetary policy meeting on 11 June saw a reversal of its relatively tight policy stance, cutting its OCR rate by 0.25 percentage points from 3.50% to 3.25% as a reaction to the low inflation environment and rapidly depreciating currency. As the situation kept on worsening throughout the month, the RNBZ is expected to react with aggressive rate cuts in the next few months.

FocusEconomics Consensus Forecast panelists see the New Zealand dollar trading at 0.73 USD per NZD at the end of 2015. For 2016, panelists see the exchange rate closing the year at 0.72 USD per NZD.

Author:, Economist

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New Zealand Exchange Rate Chart

New Zealand Exchange Rate July 2015 0

Note: Exchange rate USD to NZD.
Source: Reserve Bank of New Zealand and FocusEconomics calculations.

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