Does the New Zealand dollar still have room to fall? An in-depth analysis of the New Zealand dollar's performance over the past decade and future investment directions

Why Has the New Zealand Dollar Become a “Commodity Currency Representative”?

The New Zealand dollar (currency code: NZD), officially named the New Zealand dollar, has adopted a floating exchange rate mechanism since 1985, managed independently by the Reserve Bank of New Zealand. As one of the ninth most traded currency pairs globally, the NZD/USD quote reflects how many US dollars are needed to buy one New Zealand dollar— for example, a quote of 1.50 means approximately 1 NZD equals 1.5 USD.

The AUD and NZD are often referred to by investors as the “global economic barometers,” because both countries are typical export-oriented economies. New Zealand mainly exports agricultural products, dairy, wool, and other primary commodities, while Australia produces coal, iron ore, copper, aluminum, and other industrial goods. Due to their economies’ heavy reliance on these bulk commodities, the AUD and NZD tend to move in the same direction as international commodity prices, earning them the nickname “commodity currencies” in the industry.

The core feature of commodity currencies is that they are backed by tangible assets, not only supported by government credit but also possessing intrinsic value. Historically, gold and silver served as typical commodity currencies, while today the AUD, CAD, and NZD are representatives of this category.

The Story Behind the NZD Exchange Rate Trends Over the Past Decade

According to the latest market data, the NZD/USD exchange rate has fallen from a historical high of 0.88 USD in 2014 to just above 0.5 USD currently, a decline of over 32%. This trend reflects more than just numerical change; it is a microcosm of the global economic restructuring.

Especially after the COVID-19 pandemic, the world economy entered a recession cycle, with the AUD and NZD against the USD falling more than 10%. Many investors are now asking: Will the NZD continue to weaken in the future?

Four Deep-Rooted Reasons for the Continued Depreciation of the NZD

Impact of Fluctuations in Agricultural Commodity Prices

Agricultural products, dairy, and wool account for over two-thirds of New Zealand’s export structure. Price movements in these commodities on the international market directly determine the strength of the NZD. When agricultural prices rise, it signals a strong New Zealand economy, often leading to an appreciation of the NZD; conversely, falling prices lead to depreciation. Recently, international agricultural prices have been under pressure, becoming a significant factor in the NZD’s weakening.

Chain Reaction from Tourism Industry Slump

Tourism was once a major pillar of New Zealand’s economy. After the global outbreak of the pandemic, international travel halted, causing a massive loss of foreign exchange income. The economic momentum of New Zealand has significantly declined, dragging down the NZD’s performance.

The Absolute Advantage of the Federal Reserve’s Rate Hike Cycle

The USD’s movement is closely related to the Federal Reserve’s policies. When the Fed raises interest rates, the USD tends to strengthen relative to other non-US currencies. The widening interest rate gap between the Fed and the Reserve Bank of New Zealand makes USD more attractive than the NZD, prompting investors to hold more USD assets, thus putting downward pressure on the NZD.

Global Sudden Events Impacting Export-Driven Economies

As a small open economy highly dependent on exports, New Zealand is particularly sensitive to any global sudden events. From geopolitical conflicts to supply chain disruptions, these can directly affect its commodity exports, which in turn influence the NZD exchange rate.

Predictions from Professional Institutions on the Future of the NZD

In the long term, as the global economy continues to slow, the likelihood of the NZD entering a bear market is high. According to forecasts from international investment banks:

• Within six months: NZD/USD around 0.594
• Within one year: approximately 0.5934
• Within two years: around 0.5885
• Within three years: further down to about 0.5834

These forecasts are based on assumptions of ongoing economic slowdown and weak commodity demand. However, investors should also watch for potential reversal mechanisms: if New Zealand’s economy shows signs of recovery, risk assets regain favor, and commodity prices rise, the NZD could experience a phase rebound.

Four Mainstream NZD Investment Methods Compared

Method 1: Bank Fixed Deposit — Conservative Choice

In Taiwan, you can directly exchange TWD for NZD at the bank, then place a fixed deposit in NZD at the official exchange rate. Upon maturity, exchange back to TWD at the current rate and earn NZD interest.

Advantages: Simple operation, very low risk, familiar process
Disadvantages: Limited returns, no leverage

Method 2: Forex Funds — Professional Management

NZD funds managed by professional fund managers, investing in New Zealand currency and related assets. Due to the high volatility of the forex market, these funds carry considerable risk and potential returns.

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

Method 3: Futures Trading — High Leverage Option

NZD futures are derivatives listed on the CME (Chicago Mercantile Exchange), with product code NE. Each minimum tick of 0.0001 corresponds to a profit or loss of $10. Futures use margin trading, allowing for two-way trading (long or short).

Key Features:

• Margin system, high capital efficiency
• Two-way trading, flexible opportunities
• Risks of margin calls and liquidation, require caution
• Must settle or close position at expiry, with time limits

( Method 4: Contract for Difference (CFD) — Flexibility and Efficiency

CFD is a contract between buyer and seller based on the price difference, settled in cash without physical delivery. Essentially a margin trading product, but with several advantages over futures:

Unique Advantages of CFDs:

• Lower margin requirements, much higher capital efficiency than futures
• No delivery restrictions, can hold positions indefinitely
• Supports two-way trading, profit from both rising and falling markets
• Suitable for short-term speculation and medium-to-long-term investment

For commodity currencies like the NZD with relatively predictable trends, CFD trading can achieve more efficient capital allocation for short-term strategies.

Practical Investment Tips for the NZD

Investors should focus on the main NZD trading pairs:

• NZD/USD: the core trading pair with the highest liquidity
• AUD/NZD: a benchmark between two commodity currencies, reflecting regional economic differences
• EUR/NZD and GBP/NZD: cross-regional pairs with different volatility characteristics

Pay close attention to the policies and economic data releases from the Reserve Bank of New Zealand and the Federal Reserve. Currently, the USD shows resilience amid market turbulence, implying short-term downward pressure on the NZD. However, the long-term outlook depends on the pace of global economic recovery and commodity price trends.

Choose appropriate trading tools (fixed deposit, funds, futures, or CFD) and develop strategies based on your risk tolerance to make rational investments.