NZD/USD (New Zealand Dollar/U.S. Dollar)

What Is NZD/USD (New Zealand Dollar/U.S. Dollar)?

NZD/USD is the contraction for the New Zealand dollar and U.S. dollar currency pair. A price quote for this currency pair lets the reader know the number of U.S. dollars are expected to purchase one New Zealand dollar.

Grasping NZD/USD (New Zealand Dollar/U.S. Dollar)

The value of the NZD/USD pair is quoted as 1 New Zealand dollar for every variable number of U.S. dollars. For instance, assuming the pair is trading at 1.50, it means that it takes 1.5 U.S. dollars to buy one New Zealand dollar.

Agriculture is a major factor in the New Zealand economy; more than 66% of the exports are agricultural. One specific factor influencing the NZD is the price of dairy. New Zealand is the world's greatest exporter of whole milk powder. So in the event that milk prices are on the rise, the New Zealand economy is probably going to improve and traders might price up the currency in anticipation. The travel industry is one more staple of the New Zealand economy, so as visits to New Zealand become more affordable, the economy will be expected to improve and the currency might appreciate.

Albeit New Zealand is one of only a handful of exceptional countries where its agricultural sector is completely presented to the international economy (no sponsorships or tariffs), the NZD/USD pair might be traded for different financial reasons that don't have anything to do with the neighborhood economy or what it produces. New Zealand markets are quick to open another trading day, and banks and traders may now and again utilize this reality to position trades in anticipation of the approaching day's occasions.

Among forex traders the NZD/USD currency pair is nicknamed the "Kiwi."

The NZD/USD is likewise impacted by factors that influence the value of the New Zealand dollar or potentially the U.S. dollar corresponding to one another and different currencies. The interest rate differential between the Reserve Bank of New Zealand and the U.S. Federal Reserve (Fed) will influence the value of these currencies when compared to one another. At the point when the Fed mediates in open market activities to make the U.S. dollar more grounded, for instance, the value of the NZD/USD cross could decline, due to a reinforcing of the U.S. dollar when compared to the New Zealand dollar.

The New Zealand dollar is viewed as a carry trade currency in that it is a moderately high yielding currency. Along these lines, investors will frequently buy the NZD and fund it with a lower yielding currency like the Japanese yen or the Swiss franc.

Such trades are for risk-seeking investors and will more often than not be closed out when investors become risk averse. Evidence of this was predominant during the 2008 financial crisis when the NZD fell close to half against the Japanese yen. As volatility rose, investors loosened up these carry trades, and the NZD was one of some high-yielding currencies that fell during 2008 and 2009.

The NZD/USD will in general have a positive correlation to its neighbor, the Australian dollar (AUD/USD).

Highlights

• NZD/USD will quote the going exchange rate for the New Zealand dollar and U.S. dollar.
• It means the number of U.S. dollars are required to buy one New Zealand dollar.
• NZD/USD is likewise looked at when as a trader needs to place a carry trade.