NZD Investment Outlook: 10-Year Review and Future Forecast of the New Zealand Dollar Exchange Rate Trend Chart

Basic Knowledge of the New Zealand Dollar

New Zealand Dollar (Currency Code: NZD), officially known as the New Zealand dollar, is an important liquid asset in the South Pacific region. As early as 1985, New Zealand implemented a floating exchange rate system, ceasing the publication of official buy and sell rates by the central bank and removing the peg to a trade-weighted basket of currencies. As one of the most actively traded currencies globally, the NZD/USD currency pair ranks among the top ten in the international foreign exchange market, quoted as the amount of NZD per one USD. For example, if the quote is 1.50, then 1.5 USD can buy 1 NZD.

Ten-Year Price Performance of the New Zealand Dollar

The exchange rate of NZD against USD has shown a significant downward trend over the past decade. According to market data, the NZD fell from its historical high of 0.88 USD in 2014 to slightly above 0.5 USD currently, a cumulative depreciation of about 32%. This long-term decline reflects the multiple challenges faced by the New Zealand economy.

The Correlation Between the NZD and AUD

AUD and NZD are often regarded as leading indicators of global economic health. After the outbreak of the pandemic, the global economy entered a contraction cycle, with both currencies depreciating against the USD by over 10%. Whether the NZD will continue to weaken in the future depends on fundamental factors.

Australia and New Zealand are both export-driven economies, with industrial structures centered on commodities such as coal, iron ore, copper, aluminum, and wool. Australia holds a dominant position in international trade. Due to this export-oriented characteristic, AUD and NZD tend to move in high correlation with international commodity prices. Therefore, these two currencies are widely referred to as “commodity currencies.”

The original definition of commodity currencies refers to currencies backed by tangible assets. Besides government credit backing, these currencies have intrinsic value; historically, gold and silver are typical examples. Contemporary commodity currencies include AUD, CAD, and NZD.

Deep Reasons for the Continuous Depreciation of the NZD

Why has the NZD shown a long-term downward trend? The following four key factors need to be analyzed:

Volatility in agricultural and pastoral product prices. In New Zealand’s export structure, agricultural products, dairy, and wool account for over two-thirds, making the overall economy highly dependent on exports of these commodities. Fluctuations in their prices directly impact the NZD exchange rate; rising prices usually indicate an improved economic outlook.

Severe decline in the tourism industry. Tourism revenue has been a major pillar of New Zealand’s economy. Since the global pandemic outbreak, international travel demand has sharply contracted, severely damaging the tourism sector and dragging down economic performance.

Appreciation pressure on the USD. The Federal Reserve’s rate hike cycle has driven the USD to strengthen continuously, with widening interest rate differentials between the US and New Zealand. Divergence in monetary policies between the Reserve Bank of New Zealand and the Federal Reserve causes the NZD to depreciate relative to the USD, putting downward pressure on the NZD/USD cross rate.

Impact of global emergencies. Any major global event can disrupt New Zealand’s export trade. As a highly export-dependent economy, global emergencies such as pandemics have a significant impact on the NZD, leading to persistent depreciation.

Forecast and Long-Term Outlook for the NZD

From a long-term perspective, under the backdrop of global economic recession, the NZD is more likely to enter a bear market. As a commodity currency similar to the AUD, the NZD typically moves in tandem with the same trend. However, recent technical signals indicate a clear bearish trend, and the currency may face further declines in the short term.

According to forecasts from multiple investment banks, the target prices for NZD/USD are:

• Six-month target: 0.594
• One-year target: 0.5934
• Two-year target: 0.5885
• Three-year target: 0.5834

Since New Zealand’s economic structure is primarily export-driven, the NZD’s appreciation is driven by accelerated domestic economic growth and increased international demand, which boost GDP. Historical experience shows that when demand for risk assets is strong, commodity prices tend to rise, and investors often allocate funds to safe-haven assets like gold while selling low-yielding USD. In such scenarios, commodity-based currencies like the NZD tend to appreciate rapidly against the USD.

Currently, the USD still demonstrates resilience amid market volatility. Traders should closely monitor the policy directions of the Federal Reserve and the Reserve Bank of New Zealand to adjust their positions accordingly.

Mainstream NZD Trading Pairs

• NZD/USD: The most mainstream trading pair
• GBP/NZD: Common cross currency pair
• EUR/NZD: Another popular cross currency pair

Comparison of NZD Investment Methods

1. Bank Fixed Deposits

In Taiwan, you can directly exchange for NZD at banks, converting TWD at the current exchange rate and depositing into a fixed account. Upon maturity, you receive interest in NZD and can convert back to TWD at the prevailing rate. Advantages include familiarity and lower risk; disadvantages are limited returns.

2. Forex Funds

NZD forex funds focus on investments in New Zealand currency, managed by professional fund managers. Due to significant exchange rate volatility, these funds carry higher risk and potential for higher returns.

3. Forex Futures

NZD futures are derivative contracts traded on the Chicago Mercantile Exchange (CME), with the product code NE. Futures allow both long and short operations, with margin leverage enabling small capital to control large positions. However, futures require delivery at expiration and carry risks of forced liquidation or margin calls, requiring cautious operation.

4. Contract for Difference (CFD)

CFDs are contracts between buyers and sellers based on the price difference between the contract price and settlement price, allowing traders to profit from price movements without physical delivery of the underlying asset. Compared to futures, CFDs require lower margin, have higher capital efficiency, and can theoretically be held indefinitely without delivery or rollover concerns. CFDs support flexible two-way trading, making them especially suitable for short-term swing trading of commodity currencies like the NZD.

Introduction to Forex Margin Trading

Forex margin trading is suitable for investors with a certain risk tolerance. Common NZD-related trading pairs include:

• AUDNZD (Australian Dollar / New Zealand Dollar)
• NZDCHF (New Zealand Dollar / Swiss Franc)
• EURNZD (Euro / New Zealand Dollar)
• NZDJPY (New Zealand Dollar / Japanese Yen)
• NZDUSD (New Zealand Dollar / US Dollar)
• NZDSGD (New Zealand Dollar / Singapore Dollar)
• GBPNZD (British Pound / New Zealand Dollar)
• NZDCAD (New Zealand Dollar / Canadian Dollar)

Before investing in forex, it is recommended to practice with a demo account to fully understand market fluctuations and trading mechanisms before trading with real funds.