New Zealand Dollar (NZD) - Currency of New Zealand

Some interesting facts that we bet you did know about the New Zealand Currency:

1. The New Zealand Dollar is often referred as ‘Kiwi’, the country’s national bird. The bird also appears on the 1-dollar coins of the New Zealand Currency.
2. Altogether there are 10 denominations, of which 5 are coins and 5 are banknotes.
3. Most often used coins are 10c, 20c, 50c, $1, and $2 and bills are $5, $10, $20, $50, and $100.
4. The central bank of New Zealand is called the Reserve Bank of New Zealand.

History of the New Zealand Dollar

The New Zealand dollar, which is the official currency of New Zealand since 1967, is today among the world’s top 10 currencies. It is colloquially called kiwi, after the flightless bird kiwi, which is also the national bird and is native to New Zealand.

In the early 1800, a large number of currencies from all across the world were used to trade in New Zealand. However, in 1840, when the first Governor of New Zealand, Capt William Hobson, brought British rule to New Zealand, British coins of bronze, silver and gold were circulated freely. In the year 1870, the British coin was declared New Zealand’s official legal tender coin.

On 1st February 1935, the British coins were discontinued as legal tender. With this, New Zealand became the last self-governing dominion of the Commonwealth to raise its own coinage. Later, on July 10, 1967, decimal coinage was brought into circulation, which was a shift from the British standard to the present-day decimal system. Ever since several changes have taken place. In 1991, $1 and $2 notes were discontinued and were replaced by $1 and $2 coins, which were golden in colour and feature the Kotoko, the white heron found in New Zealand. In the year 2006, the silver coins had a make-over. 10, 20 and 50 cents became smaller and lighter. The 10-cent coins were now copper in colour and the 5-cent coins ceased circulation.

Since 1999, the New Zealand government has been producing plastic/ polymer versions of the dollar, which makes the bills better secured against counterfeiting. Not just this, but the composition also increases the longevity of the notes. Polymer notes are said to last up to 4 times as paper or linen banknotes. These polymer notes can also survive a washing machine without any damage to the material. The Reserve Bank of New Zealand in 2015, updated the dollar making it more brightly coloured and with better security features.

Factors Affecting New Zealand Dollar

The Reserve Bank of New Zealand is responsible for making the country’s fiscal decisions. Headed by Adrian Orr, the RBNZ holds regular meetings to maintain stability in the prices, monitor the currency exchange rates and also set the interest rates. There are many economic factors that affect the New Zealand Dollar, such as the GDP, the rate of unemployment, the growth rate, inflation etc. Some other important factors include:

1. Multiple Industries:

Rich in natural resources, the top industries in New Zealand include dairy, agriculture, fishing, mining, forestry and tourism.

1. In the New Zealand economy tourism is a strong driving force, and it makes up almost 6% of the gross domestic product. When tourism improves the currency would also be stronger.
2. Being one of the largest exporters of milk powder, the NZD benefits when the prices of milk rise.

2. Relationship with Australia:

After China, Australia is New Zealand’s largest trading partner and accounts for 13.6% of New Zealand’s exports. Therefore, the economy of Australia has a considerable effect on the New Zealand dollar. Currency pairs NZ Dollar and US Dollar and AU Dollar and US Dollar have a currency correlation coefficient. A correlation coefficient is a statistical measurement of the relationship between 2 currencies, which here is 0.90.

3. Carry Trade:

A popular trading strategy, carry trade, means buying high-yielding currency while funding it with a low-yielding one. As New Zealand has had higher rates of interest as compared to other developed countries, investors and traders favour the NZD as a carry trade currency.

Also, NZ Dollar is one of the top-traded currencies, all across the globe. It is considered to be a liquid currency in the forex market. There are many internationally-owned companies and banks in New Zealand, which offer a higher FX turnover.