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When will the New Zealand dollar start to rise? NZD/USD forecast

Commentaries & Views

The New Zealand dollar's performance has lagged behind that of the US dollar, the euro, the pound, the Australian dollar, the DXY index… A pretty long list, to be honest. Let’s analyze what has been going on with the New Zealand currency this year and whether it’s a moment to purchase some kiwis while they are at their lows. 

Using charts with this year's movements, we can assess the extent of the downturn. The first chart illustrates the NZDUSD – one of the major currency pairs. While the US dollar has adjusted following its fantastic performance in the previous year, the NZD has fallen considerably.

Now, let's broaden our perspective – we’ve added the EURUSD and the GBPUSD to the same chart. Both the euro and the British pound have outperformed the USD so far. 

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The US dollar index, representing how the USD is performing relative to all major currencies, paints a similar picture.

And even the Australian dollar, a close friend of the NZD with shared trends, has seen stronger performance in these eight months.

The NZDUSD pair is hovering at nearly 0.59 right now, and there are several reasons for this and why significant changes may not be on the horizon anytime soon. The main factor is the strong position of the USD. The Federal Reserve is not going to reduce interest rates, and the US economy fares better than expected. The US dollar with its safe haven status still seems a solid choice.

Simultaneously, the Reserve Bank of New Zealand has already finished its hawkish cycle; therefore, market participants can’t expect to profit from the difference in key rates. The local economy is in a technical recession. What's more, New Zealand is receiving less revenue from exports.

The NZD is one of the commodity currencies, and a crucial market for local exports is China, accounting for approximately a quarter of all volumes. However, the Chinese economy is going  through a bad patch. Market participants anticipated a post-Covid boom in 2023, but the Yuan is at its lowest point, and the focus is on support measures for the local economy instead.

All the above-mentioned gives grounds to expect that the NZDUSD may continue to trade near the level of 0.6 by the end of 2023. Significant changes could become possible already in 2024 when the Fed begins to reduce the key interest rate and the New Zealand economy is likely to fare better (along with the Chinese one). By the end of 2024, the NZDUSD rate might reach 0.7.

However, it's important to remember that markets evolve daily, so conducting your own analysis is crucial, and the final decisions should be yours.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.