Latest news with #US60c
Scoop
18-05-2025
- Business
- Scoop
Planning A Holiday? Here's Where Your Dollar Might Go Further Than Normal
Article – RNZ New Zealand's dollar has become a little stronger against the US in the past month – but if you're looking for a holiday where you can make the most of the exchange rate, that's not the part of the world to be looking in. Susan Edmunds, Money Correspondent New Zealand's dollar has become a little stronger against the US in the past month – but if you're looking for a holiday where you can make the most of the exchange rate, that's not the part of the world to be looking in. The NZD has been worth as much as US60c in recent weeks. But based on historical performance, it remains weak. Data from Infometrics chief forecaster Gareth Kiernan showed, at an exchange rate of one dollar buying US58c, the dollar is 12 percent down on the USD's average exchange rate of the last 10 years and down 17 percent over 20 years. It's down 12 percent against the euro over the 10-year period, and against the British pound. But there are parts of the world where the New Zealand dollar is going further than normal at present. Travelling to Australia isn't so bad. The dollar is down 1 percent compared to the average of the last 10 years but up 4 percent over the last 20 years and 5 percent over the last 30. On a 10-year average basis, the dollar is also up against the Japanese yen, up 9 percent, Indian rupee, up 3 percent, Indonesian rupiah, up 2 percent, and South Korean won, up 4 percent. It is up 30 percent compared to a 30-year average for the Indian rupee, 20 percent for the Japanese yen and 41 percent for Indonesia. Kiernan said the fact that the strength was limited to a smaller group of countries was due to a few factors. 'New Zealand's growth performance over the last couple of years, plus immediate prospects, remain relatively poor, so international investors are looking at other places to put their money where the expected returns might be better. 'Secondly, there's a high level of risk aversion and uncertainty at the moment, which typically count against New Zealand as well,' he said. 'The latter factor might not be helped by our fiscal position, with negative comments from credit ratings agencies last year and close attention being paid to the track back towards balancing the books at next week's Budget. Our government debt levels might not be as high as many other countries, but we tend to get held to a higher standard because we're relatively small, which adds to the perception of risk.' David Coombes, chief executive of House of Travel, said there had been a slight softening in bookings to the US in the last few weeks, and the dollar could be playing a part in that. 'Our stores across the country are saying that the current exchange rate, with the New Zealand dollar weaker against the US, is influencing customer destination choices, with many looking to places where their money goes further on the ground.' A report from Mastercard analysed exchange rate movements and the number of tourist arrivals from 2000 to 2024 across 24 tourism markets to determine how much of an impact currency movements could have. Across six tourism destinations – Japan, US, Australia, Hong Kong, Singapore and Switzerland – it estimated the change in the number of tourists arriving when the currency dropped 1 percent. It found the biggest impact was for travel from China to Japan – a 1 percent depreciation of yen against the renminbi was associated with a 1.5 percent increase in tourists to Japan. New Zealand visitor numbers only lifted 0.2 percent in response to the same degree of depreciation and were also less responsive to changes in the USD. 'Travellers from Asia tend to be more sensitive to exchange rate fluctuations, as such movements can significantly impact their purchasing power during international travel – an important factor in their outbound travel planning. 'In comparison, the long distances between New Zealand and most travel destinations mean that New Zealand travellers may not be able to easily alter their travel decisions based on changing foreign exchange conditions. Additionally, travellers from more developed markets are generally more influenced by local economic conditions than by FX changes.' The Mastercard analysts said the dollar would need to shift by 10 percent or 15 percent against another currency to have an impact on travel decisions.
Scoop
18-05-2025
- Business
- Scoop
Planning A Holiday? Here's Where Your Dollar Might Go Further Than Normal
, Money Correspondent New Zealand's dollar has become a little stronger against the US in the past month - but if you're looking for a holiday where you can make the most of the exchange rate, that's not the part of the world to be looking in. The NZD has been worth as much as US60c in recent weeks. But based on historical performance, it remains weak. Data from Infometrics chief forecaster Gareth Kiernan showed, at an exchange rate of one dollar buying US58c, the dollar is 12 percent down on the USD's average exchange rate of the last 10 years and down 17 percent over 20 years. It's down 12 percent against the euro over the 10-year period, and against the British pound. But there are parts of the world where the New Zealand dollar is going further than normal at present. Travelling to Australia isn't so bad. The dollar is down 1 percent compared to the average of the last 10 years but up 4 percent over the last 20 years and 5 percent over the last 30. On a 10-year average basis, the dollar is also up against the Japanese yen, up 9 percent, Indian rupee, up 3 percent, Indonesian rupiah, up 2 percent, and South Korean won, up 4 percent. It is up 30 percent compared to a 30-year average for the Indian rupee, 20 percent for the Japanese yen and 41 percent for Indonesia. Kiernan said the fact that the strength was limited to a smaller group of countries was due to a few factors. "New Zealand's growth performance over the last couple of years, plus immediate prospects, remain relatively poor, so international investors are looking at other places to put their money where the expected returns might be better. "Secondly, there's a high level of risk aversion and uncertainty at the moment, which typically count against New Zealand as well," he said. "The latter factor might not be helped by our fiscal position, with negative comments from credit ratings agencies last year and close attention being paid to the track back towards balancing the books at next week's Budget. Our government debt levels might not be as high as many other countries, but we tend to get held to a higher standard because we're relatively small, which adds to the perception of risk." David Coombes, chief executive of House of Travel, said there had been a slight softening in bookings to the US in the last few weeks, and the dollar could be playing a part in that. "Our stores across the country are saying that the current exchange rate, with the New Zealand dollar weaker against the US, is influencing customer destination choices, with many looking to places where their money goes further on the ground." A report from Mastercard analysed exchange rate movements and the number of tourist arrivals from 2000 to 2024 across 24 tourism markets to determine how much of an impact currency movements could have. Across six tourism destinations - Japan, US, Australia, Hong Kong, Singapore and Switzerland - it estimated the change in the number of tourists arriving when the currency dropped 1 percent. It found the biggest impact was for travel from China to Japan - a 1 percent depreciation of yen against the renminbi was associated with a 1.5 percent increase in tourists to Japan. New Zealand visitor numbers only lifted 0.2 percent in response to the same degree of depreciation and were also less responsive to changes in the USD. "Travellers from Asia tend to be more sensitive to exchange rate fluctuations, as such movements can significantly impact their purchasing power during international travel - an important factor in their outbound travel planning. "In comparison, the long distances between New Zealand and most travel destinations mean that New Zealand travellers may not be able to easily alter their travel decisions based on changing foreign exchange conditions. Additionally, travellers from more developed markets are generally more influenced by local economic conditions than by FX changes." The Mastercard analysts said the dollar would need to shift by 10 percent or 15 percent against another currency to have an impact on travel decisions.
NZ Herald
13-05-2025
- Business
- NZ Herald
Capital Markets: Trump tariffs trigger New Zealand dollar volatility, impact global trust – Craig Cooper and Mark Edwards
In various ways, global investor trust in the United States and particularly the US dollar (USD) is being challenged. Actions to date by the Trump administration impinge on the three pillars underpinning the primacy of the USD in global finance and its ongoing reserve currency hegemony. These are trade, international alliances and faith in US institutional structures. Of the major developed currencies, the USD has been the worst-performing this year, unwinding previous years of outperformance. Regarding the USD outlook, the phrase 'regime shift' is now being bandied about. While currencies can be notoriously difficult to predict, there is consensus building that the USD could face significantly more downside pressure. We concur. Cyclical pressures In addition to the structural headwinds now facing the USD, as investors question the direction of the United States, cyclical pressures are building. While the market could well have moved past the period of peak anxiety around the US policy agenda, US economic headwinds are just beginning and the 'R' word, or risk of recession, is being widely used. The chance of recession adds a cyclical dimension to USD risk in addition to the wider structural forces. Buying US assets has been a strong and winning trade over much of the past decade and just a small but consistent global asset allocation shift out of this trade could easily see further downside pressure for the USD. An overt shift out of US dollars resulted in the New Zealand dollar (NZD) trading back above US60c in April. When talk of a US economic recession or global recession risk is rife, the NZD normally struggles to perform. However, in a regime shift, past relationships don't necessarily apply. The strong recovery in the NZD through April came during a period of notable downgrades to the global growth outlook, as conveyed, for example, in the International Monetary Fund's April economic update. The heightened volatility has created a difficult environment for exporters with foreign currency receipts, and importers with foreign denominated costs. The NZD has traded in a wide range between US55c and US60c to the USD over the last month, meaning wild variations when converting foreign denominated exposures into NZD. Very simply, a lower NZD will generally benefit exporters who are paid in foreign currencies, while a higher NZD will generally benefit importers who pay suppliers in foreign currencies. Fortunately for New Zealand companies, there are market strategies to manage this volatility and uncertainty. While not suitable in all cases, FX hedging solutions can be used to lock in a rate on a specified date in the future, or to allow risk managers to hedge currency risk, while maintaining full or limited participation in favourable FX moves. In investor portfolios, the impact of the currency is an important consideration for both risk and return. According to BNZ's most recent FX Hedging Report, which is a unique survey of the managed funds industry in New Zealand, fund managers have, on average, just under 60% of their assets overseas. The currency exposure created by these offshore assets is typically partly, if not largely, hedged, whereby the New Zealand fund manager will lock in a rate to sell the underlying foreign currency and buy New Zealand dollars on a future date. 'Over-hedged' At the peak of the recent market turmoil in early April, fund managers were quickly finding themselves 'over-hedged' relative to their target. This was because, as global equity markets plunged, the value of their offshore assets declined sharply. To counter this value destruction, they would have needed to reduce their hedging by selling the NZD forward, putting further downward pressure on the currency. Then, when Trump announced the 90-day pause to reciprocal tariffs and markets rebounded, this dynamic reversed. This whipsawing behaviour in financial markets highlighted the challenging environment for portfolio managers. Adding to the challenge, when the NZD is in steep decline, New Zealand fund managers also face the prospect of losses on their hedging contracts. If these losses are realised, then some fund managers could be forced to sell assets in order to fund those losses. This is one reason managers generally hold an allocation of highly liquid assets such as cash, as selling illiquid assets in highly volatile markets can be costly, if not infeasible within a short timeframe. The subsequent recovery in the NZD has seen currency hedges mostly move back 'in-the-money' which, if realised, will supplement investment returns. BNZ is active in the provision of solutions for New Zealand businesses and investors with exposures to fluctuating exchange rates. We have teams of financial markets professionals able to discuss and provide solutions to specific foreign exchange requirements. The BNZ Currency Overlay Solutions Group is a specialist team that provides a low-cost opportunity for wholesale New Zealand investors wishing to remove, or reduce, the currency risk associated with foreign asset exposures. BNZ takes on the operational responsibility of currency management from investors, with a robust programme flexible enough to meet unique client requirements, while reducing transaction costs. Financial markets have been volatile this year and conditions could remain choppy for some time yet, but businesses and investors can minimise risk with appropriate trading strategies. While this article shouldn't be considered financial advice (and we always recommend that clients seek their own independent financial advice), hedging foreign exchange risk may be a key part of your toolkit to smooth out fluctuations on returns and earnings.
NZ Herald
29-04-2025
- Business
- NZ Herald
Inside Economics: Why the Kiwi is so strong against the Aussie dollar, the big Budget squeeze ... and asset recycling
My question is: based on fundamental micro and macro-economic comparisons of the current New Zealand and Australian economies, what factors, in your opinion are keeping the Kiwi dollar in the 90c+ range to the Australian dollar? The reason I ask is that the two places I spend time, Auckland and Brisbane, the strength of the NZ dollar is not warranted because the lived experience in each city currently is very different. And respective reserve bank rates and forecasts are diverging. Warm regards, John G. A: Thanks John. You're right, the Kiwi does seem surprisingly strong against the Aussie dollar, given the state of the two economies and much lower interest rates over here. At the time of writing, the Kiwi was buying 93 Australian cents. It had me baffled, so I asked BNZ senior markets strategist Jason Wong, who watches it all much more closely than I do. Wong says he's also been a bit bemused by the Kiwi's strength. But the real mystery was why it didn't fall away a lot more last year when we were clearly in recession, and the Reserve Bank (RBNZ) was cutting rates hard, he said. Meanwhile, Australia's economic growth was holding up well, it had higher inflation and a central bank that was reluctant to cut rates. Right now, the simplest explanation for the strength in the Kiwi dollar relative to the Aussie dollar was that Australia looked to be more exposed to the fallout of a trade war between the US and China, Wong said. So the market view is that hard commodities like iron ore and copper are going to come under more pressure from the trade squeeze than soft commodities, such as dairy. Dairy prices have remained strong. They are one of the key indicators that international traders consider when weighing up the New Zealand economy. With Australia having a closer political relationship to the US and generally a more terse relationship with China, it may also find itself closer to the sharp edge of the geopolitical tension. New Zealand's domestic economic recovery does appear to have faltered in the past few weeks, and after all the tariff turmoil, the RBNZ is expected to cut rates further. But the same kind of story – of trade wars slowing the global economy – is playing out in Australia, so that has not affected the balance of things too much. Perhaps, although this is just me speculating now, the Federal election is weighing on the Aussie dollar too. It's been notable that both the major parties – Labor and the Liberal/National coalition – have been under fire for fiscally irresponsible spending promises. Meanwhile, as was reiterated by Finance Minister Nicola Willis in her pre-Budget speech yesterday, the New Zealand Government remains committed to playing it tight. Rise against the greenback More broadly, the Kiwi has risen sharply in value against the US currency in recent weeks. It has been trading up around US60c – up from around US55c just a few weeks ago. NZ Herald senior markets reporter Jamie Gray took a look at the big picture last week. 'The imposition of trade tariffs and [US President Donald] Trump's attacks on [Federal Reserve chairman Jerome] Powell have tarnished the US dollar's allure as a safe-haven currency, which has boosted the Kiwi dollar and several other currencies,' Gray wrote. The market was taking a view that its trade policy was going to upset the US economy and that recession risk had become heightened, BNZ's Wong said. 'The other dynamic is structural, where Trump is chipping away at the bedrock that the US economy has been built on – free trade, free capital flows and an independent Federal Reserve,' he said. 'All these sorts of things are under threat, so the risk premia around US assets has increased and the weaker US dollar is a byproduct of all that. 'Over the last decade, the US dollar and the US economy have outperformed and everyone has been long [on] US dollars, wanting a piece of the action, so that trade is just beginning to unwind.' US President Donald Trump (left) looks on as his nominee to chair the Federal Reserve, Jerome Powell, takes to the podium during a press event in 2017. Photo / Getty Images Bond battle On a similar theme at the weekend, Wellington business editor Jenée Tibshraeny has taken a look at how US indebtedness (and dependence on the bond market) is curbing Donald Trump's policy ambitions. With US net debt nearing 100% of gross domestic product (GDP – New Zealand's is at 25%, according to the same measure of debt used in an IMF comparison), its interest costs are material, she writes. Trump needs interest rates to fall to stimulate growth and ease the cost of servicing the US' big pile of government debt. Yet the more brazen he gets with tariff policies and threats to erode the independence of the Federal Reserve, the riskier he makes investing in US Government debt, otherwise known as bonds or treasuries. If investors believe they're taking on more risk, they'll demand higher returns. Tibshraeny quotes Harbour Asset Management co-chief executive Andrew Bascand, who describes the bond market as the US' 'Achilles heel'. All bets are off Unpredictable moves on currency markets, extreme volatility on equity markets ... there's no question we're in unprecedented territory, with US policy overshadowing everything in the global economy. BNZ head of research Stephen Toplis attempts to put a bit of context around the chaos with a research note this week titled 'Central Banks in Disarray'. He points out that it is nearly impossible for central banks to produce credible long-term forecasts right now – and some have given up. The Bank of Canada has stopped publishing forecasts and the European Central Bank did not provide forward guidance on its rate track when it released its latest monetary policy decision. The RBNZ doesn't have to publish new forecasts and update its rate track until the next Monetary Policy Statement on May 28, but it's hard to know if the outlook will be much clearer then. Toplis makes the case for pausing long-term forecasts and concentrating on more in-depth analysis of a range of different scenarios. The RBNZ does have a track record of withdrawing guidance, he says. In the monetary policy decisions of May 2020, August 2020, November 2020 and February 2021 (as Covid raged), it provided no Official Cash Rate (OCR) projection past March 2021. 'There is no reason why it couldn't do something similar at the May 28 announcement. It certainly couldn't be blamed for doing so,' Toplis writes. RBNZ officials had already highlighted the possibility that they might produce more scenario analysis in future, he says. Budget squeeze As mentioned earlier, Nicola Willis' pre-Budget speech yesterday has made it clear that the Government is sticking to its guns on the fiscal plan. Finance Minister Nicola Willis. Photo / Mark Mitchell Despite forecasts of lower economic growth, which will translate to less tax revenue, Willis has reiterated the Government's intention to have the Crown accounts back in surplus by 2029. That means a big cut to spending plans with a proposed operating allowance just $1.3 billion, down from $2.4b. That, according to Treasury, won't be enough to fund the increased cost of delivering existing services, so expect to see more significant cuts to spending. Willis argues there is scope there as the Government continues to reassess its priorities. 'The reality of global economic events is that if we'd pushed on with a larger operating allowance, then we would be staring down the barrel of even bigger deficits and debt,' Willis said. Expect to hear plenty of debate in the coming weeks about the spending constraints, which some will argue are self-imposed. The question ultimately comes down to how people feel about Crown debt and how quickly we need to pay it back to a more sustainable level – or exactly what a sustainable level is, for that matter. It's a tough balancing act for any Government, given the options are limited – tax more, cut spending or borrow more. Or, sell some assets ... Asset recycling New Zealand Initiative chair Roger Partridge made the case for another look at state asset sales in a column last week. The Crown's accounts record $44.3b of taxpayer equity tied up in state-owned enterprises, he writes. 'Yet these businesses struggle to deliver returns that justify continued Government ownership.' It's always a controversial topic in New Zealand, in part, I assume, because asset sales were done quite badly in the 1980s. Of course, the extent to which people want the Government to be involved in owning and running assets is also one of the fundamental economic divides. But ironically, one of the reasons the public is so suspicious of asset sales is down to a lack of trust in the Government to spend money wisely. It doesn't matter how good the logic for selling an asset is; if the Crown squanders the windfall, we're no better off. With that in mind, Partridge highlights the success New South Wales has had with a disciplined approach that ensures money from asset sales is 'recycled' into new infrastructure projects. 'NSW has generated A$53 billion ($56.9b) since 2012 through a straightforward principle: sell assets the Government does not need to own and invest the proceeds in infrastructure the public does need,' Partridge writes. 'Strong governance is the key to the success of the programme,' he says. 'Proceeds from the sale of state-owned assets were ring-fenced in the Restart NSW Fund, ensuring transparency and preventing funds from disappearing into general government spending.' 'This ring-fencing proved crucial for maintaining public support in a state where voters were initially as sceptical of asset sales as New Zealanders.' Partridge points out that Prime Minister Christopher Luxon has already expressed some enthusiasm for the idea of asset recycling and suggests we may see National campaign on it for next year's election. Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up to my weekly newsletter, click on your user profile at and select 'My newsletters'. For a step-by-step guide, click here. If you have a burning question about the quirks or intricacies of economics send it to or leave a message in the comments section.
