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NZDUSD Currency Pair

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Overview | NZDUSD Chart | Key Facts

The NZDUSD Currency Pair

The currency pairing between the New Zealand dollar (NZD) and the United States dollar (USD) provides several distinct trading and investment opportunities. The NZD/USD, known among currency traders as the “kiwi,” is considered a commodity pairing. A commodity pair’s exchange rate tends to exhibit a correlation to the current market value of an underlying commodity. Typically, the commodity is local to one or both nation’s economy. There are three major commodity pairings on the forex: USD/CAD, AUD/USD and NZD/USD.

The prominent commodities related to NZD/USD are agricultural in nature, specifically dairy products. New Zealand is a top-five global exporter of dairy, and the transportation of milk powder, butter and cheese represent 21.2% of New Zealand’s total exports.1)Retrieved 15 October 2016 https://www.newzealandnow.govt.nz/investing-in-nz/opportunities-outlook/economic-overview New Zealand is the fourteenth-largest supplier of agricultural goods to the United States, totaling US$2.2 billion.2)Retrieved 15 October https://www.newzealandnow.govt.nz/investing-in-nz/opportunities-outlook/economic-overview

Intraday volatilities facing NZD/USD can become magnified around the release of data relevant to New Zealand’s dairy industry. It is important for traders of NZD/USD to be aware of release times concerning various agricultural reports in addition to regular events, such as the New Zealand Dairy Auction.

NZD/USD is also used by traders and investors as a vehicle by which to execute a carry trade. A carry trade is one in which an investor sells a currency and invests the proceeds into another currency that has a higher yield. In a carry trade, profit is realized from the difference in interest rates and through exchange rate fluctuations.

The Reserve Bank of New Zealand (RBNZ) takes an aggressive stance towards managing inflation. Thus, the NZD typically operates with a higher prime rate than the currencies of other developed countries. For the year 2016, the RBNZ set interest rates at 2%, while the United States Federal Reserve (FED) established a rate of .5% for the USD.3)Retrieved 15 October 2016 http://www.global-rates.com/interest-rates/central-banks/central-banks.aspx The discrepancy between the interest rates of each country makes NZD/USD attractive to traders and investors looking to incorporate the carry trade into their trading plan.


Key Facts: NZD/USD

New Zealand Dollar

United States Dollar

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