Will the New Zealand dollar continue to weaken against the US dollar? 2024 New Zealand dollar trend analysis and investment guide

Basic Understanding of the New Zealand Dollar

The New Zealand dollar (currency code: NZD), also known as the Kiwi, is one of the most actively traded currencies globally. The NZD/USD ranks ninth among major currency pairs worldwide, with its cross rate quoted as 1 New Zealand dollar exchanges for a certain amount of US dollars. For example, if the exchange rate is 1.50, it means 1.5 US dollars are needed to buy 1 Kiwi.

New Zealand adopted a floating exchange rate system as early as 1985, with the Reserve Bank of New Zealand ceasing official peg quotes. The fluctuation of the Kiwi is entirely determined by market supply and demand, making it one of the most liquid currencies in the global foreign exchange market.

The Truth Behind the Recent Sharp Depreciation of the Kiwi

Based on recent data, the Kiwi has fallen from its 2014 high of 0.88 to around 0.5 USD, a cumulative depreciation of 32%. Multiple factors drive this ongoing downward trend.

The Kiwi and the Australian dollar are often seen by the market as barometers of the global economic outlook. Post-pandemic global economic recovery has cooled, with both currencies depreciating against the US dollar by over double digits, raising concerns among investors about the outlook for the Kiwi.

Four Core Factors Affecting the Kiwi Exchange Rate

Fluctuations in Agricultural and Commodity Prices

New Zealand’s export structure is highly concentrated in agriculture, with wool, dairy products, and agricultural goods accounting for over two-thirds of total exports. As a typical commodity currency, the Kiwi moves in tandem with commodity prices. Rising international prices for agricultural and dairy products usually boost the Kiwi, while declines increase downward pressure.

Long-term Impact of Tourism Industry Contraction

Tourism is the second-largest pillar of New Zealand’s economy. Since the outbreak of COVID-19, international visitors have sharply declined, continuously weighing down the exchange rate. Even after border reopening post-pandemic, the recovery of international tourism remains slow.

The Fed’s Rate Hike Cycle Suppression

The Federal Reserve’s policy stance has a profound impact on the USD/NZD exchange rate. When the Fed enters a rate hike cycle, US interest rates rise relative to the Reserve Bank of New Zealand’s policy rates, widening the interest rate differential and strengthening the US dollar. Consequently, the NZDUSD cross rate tends to decline. Currently, the US dollar remains resilient, with a clear interest rate advantage.

Global Uncertainty Events

Geopolitical conflicts, trade frictions, and other unexpected events can influence New Zealand’s export demand and commodity prices. As an economy highly dependent on exports, New Zealand is sensitive to global shocks, making the Kiwi prone to rapid declines during risk events.

Medium-term Outlook for the Kiwi Exchange Rate

Bearish Market Expectation Is Forming

From a medium-term perspective, due to weakening global economic growth expectations and diminishing fundamentals supporting New Zealand as a commodity exporter, major investment banks generally hold a bearish view on the Kiwi. Market forecasts suggest the USD/NZD may continue to decline:

• 6-month target: 0.594
• 12-month target: 0.5934
• 24-month target: 0.5885
• 36-month target: 0.5834

Opportunities for Rebound Still Exist

Although short-term outlooks are bearish, the long-term upward momentum of the Kiwi is driven by New Zealand’s economic growth, increased demand for its products, and domestic GDP expansion. When demand for risk assets is strong, commodity prices tend to rise, prompting investors to increase allocations in high-yield assets (such as gold and commodities) and sell off low-yield US dollars. This can push up the value of the commodity-backed Kiwi relative to the safe-haven US dollar.

Four Ways to Invest in the Kiwi Compared

1. Kiwi Fixed Deposit

Exchange NZD at the current bank rate and deposit into a fixed-term account. At maturity, convert back to the local currency at the prevailing rate.

Advantages: Minimal risk, familiar operation
Disadvantages: Limited returns, inflexible

2. Kiwi Forex Fund

Managed by professional fund managers, investing in Kiwi assets, with significant exposure to exchange rate fluctuations.

Advantages: Professional management, risk diversification
Disadvantages: Higher fees, volatile returns

3. Kiwi Futures

Traded on CME(CME), with product code NE, minimum tick size 0.0001, and a minimum fluctuation value of $10.

Advantages: Good liquidity, high leverage
Disadvantages: Risk of margin calls and liquidation, requires capital management experience

4. Contract for Difference (CFD)(CFD)

A contract-based trading where both parties settle the difference without physical delivery. Compared to futures, it requires less margin and offers higher capital efficiency.

Advantages: Flexible two-way trading, can go long or short, no delivery pressure
Disadvantages: Concentrated risk, requires strict risk control

Overview of Major Currency Pairs with the Kiwi

Investors can choose trading pairs based on their needs:

• NZD/USD(NZDUSD): The most mainstream pair
• AUD/NZD(AUDNZD): Regional commodity currency comparison
• GBP/NZD(GBPNZD): Cross-regional trading opportunities
• EUR/NZD(EURNZD): Diversified portfolio
• NZD/JPY(NZDJPY): Arbitrage options
• NZD/CHF(NZDCHF): Risk hedging tool
• NZD/CAD(NZDCAD): Commodity currency linkage
• NZD/SGD(NZDSGD): Asia-Pacific regional trading

Core Recommendations for Investing in the Kiwi

When trading the Kiwi, focus on the policy decisions of the Reserve Bank of New Zealand and the Federal Reserve, closely monitor international commodity prices, and stay alert to the impact of global economic data releases on risk assets.

As a typical commodity currency, the Kiwi’s trend is relatively predictable, with opportunities for two-way profits in short-term trading. Investors can choose from bank deposits, funds, futures, and CFDs based on their risk tolerance to diversify assets.

Regardless of the investment method, establishing clear entry points, stop-loss levels, and profit targets is essential for risk control. In the current environment of a strong US dollar and high global economic uncertainty, a cautious and systematic trading strategy for the Kiwi is even more important.