Will the New Zealand dollar continue to depreciate? Analyzing the New Zealand dollar's trend from a commodity currency perspective

New Zealand Dollar (NZD), commonly known as the Kiwi, is one of the major trading currencies in the world. The NZDUSD currency pair ranks ninth in global trading volume. This currency pair means buying New Zealand dollars with US dollars—for example, when the trading price is 1.50, it takes 1.5 USD to buy 1 NZD. As exchange rates fluctuate, many investors also pay attention to the changes in the NZD to RMB exchange rate.

How Much Has the Kiwi Fallen?

Since reaching a historical high of 0.88 in 2014, the NZD against the US dollar has fallen to around 0.5 USD, a decline of over 30%. There are deep economic reasons behind this. New Zealand is a typical export-driven economy, with agricultural products, dairy, wool, and other commodities accounting for two-thirds of its total economy. Because of this industrial structure, the Kiwi is classified as a “commodity currency”—its value is closely related to the price trends of major international commodities.

Similar to the Kiwi is the Australian dollar. AUD and NZD are often seen as barometers of global economic growth, usually moving in the same direction. Since the pandemic, facing recession pressures worldwide, both currencies have depreciated against the dollar by more than 10%.

Why Is the Kiwi Continually Depreciating?

Falling agricultural product prices are the primary factor. Agriculture exports account for a high proportion of New Zealand’s exports. When dairy, wool, and agricultural product prices fall on the international market, it directly impacts the demand for the Kiwi.

Tourism industry decline is the second pressure. Tourism was once a pillar of New Zealand’s economy. After the global pandemic, this industry suffered a heavy blow, reducing foreign exchange income.

Federal Reserve rate hikes strengthening the dollar is the third factor. The Fed’s rate hikes have driven the USD higher, and the interest rate gap between the Fed and the Reserve Bank of New Zealand continues to widen. Due to the relative appreciation of the dollar, the NZDUSD exchange rate may continue to face downward pressure.

Global sudden event shocks cannot be ignored. As an export-oriented economy, New Zealand is highly sensitive to any global risk events. From the pandemic to geopolitical conflicts, these can directly affect export trade.

How to View the Future Trend of the Kiwi?

According to forecasts from investment banks, the NZD/USD may continue to decline in the short term. Predicted levels are:

• In 6 months: 0.594
• Within 1 year: 0.5934
• Within 2 years: 0.5885
• Within 3 years: 0.5834

These forecasts reflect a pessimistic market outlook for the Kiwi. However, there are also bullish voices—when global risk appetite improves and commodity demand rebounds, New Zealand, as a commodity exporter, will benefit and push up the Kiwi’s valuation. Especially when investors seek high-yield assets, demand for New Zealand products rises, domestic GDP growth accelerates, which can support the Kiwi’s appreciation.

In the short term, two key variables should be monitored: the policy directions of the Federal Reserve and the Reserve Bank of New Zealand. Changes in interest rates from these two central banks will directly influence the exchange rate and the trend of the Kiwi.

Main Currency Pairs for Trading the Kiwi

NZD/USD is the most popular Kiwi currency pair, with high liquidity, narrow spreads, and clear influence from the policies and economic data of both countries.

GBP/NZD is a secondary currency pair, with relatively lower liquidity, wider spreads, and higher volatility.

EUR/NZD is also a secondary pair, with European Central Bank policies indirectly affecting this pair through inflation and interest rate impacts.

Additionally, there are other trading pairs such as AUD/NZD, NZD/JPY, and more.

How to Invest in the Kiwi? Four Approaches Compared

First: Bank Fixed Deposit
Exchange NZD at the bank and deposit regularly, earning interest based on the current exchange rate. This method has low risk and low threshold but offers modest returns, and is affected by exchange rate fluctuations, requiring you to bear the risk of exchange timing.

Second: Forex Funds
Managed by professional fund companies, NZD funds track exchange rate movements. Returns and risks are higher than fixed deposits, but understanding fund structure and fee costs is necessary.

Third: Futures Trading
NZD futures are traded on the Chicago Mercantile Exchange (CME), with code NE, minimum tick size of 0.0001, unit value of $10, and physical delivery. Futures are margin products, allowing long and short positions, but carry risks of forced liquidation and margin calls, requiring strict risk management.

Fourth: Contracts for Difference (CFD)
CFDs are contracts between buyers and sellers based on price differences, where investors do not own the physical asset but participate in price fluctuations. Compared to futures, CFDs require less margin, have higher capital efficiency, and can achieve “small investment for big gains.” Since there is no delivery deadline, they can be held long-term, and support both long and short positions—offering high flexibility. For commodity currencies like the Kiwi, with relatively predictable trends, short-term two-way trading via CFDs can better seize opportunities.

Summary: Key Points for Kiwi Investment

As a commodity currency, the Kiwi’s movement is highly correlated with the global economic cycle and commodity prices. Currently, with global economic sluggishness, USD appreciation, and pressure on agricultural prices, these factors collectively depress the Kiwi. If the global economy recovers, commodity demand rebounds, and the Fed halts rate hikes, the Kiwi may see a rebound opportunity.

The core of Kiwi investment is to grasp the big cycle—monitoring central bank policy changes, commodity price trends, and global risk events. When choosing investment tools, consider your risk tolerance and trading horizon. Investors wanting to exchange NZD to RMB or participate in exchange rate trading should open relevant trading accounts and keep an eye on key economic data releases in the economic calendar.