If you have watched The Lord of the Rings, you may know that Middle-earth is shot in the mountains of New Zealand.
In addition to being the hometown of Frobo Baggins and his Hobbit friends, New Zealand is one of Australia’s neighbors in Oceania, located in the southern Pacific Ocean.

The country is mainly composed of two islands, North Island and South Island, in addition to some small islands.

New Zealand, known for having more sheep than people, has 4 million inhabitants. To make you more clear about what this represents, let’s take an example. In 2011, New York alone had a population of 8.4 million.

New Zealand is also known as Aotearoa, and the Maori word means “home of Changbaiyun”. Maori is one of New Zealand’s main languages.
New Zealand country profile-Yuhui International
Neighboring countries: Australia, Fiji, Tonga
Area: 104,454 square miles
Population: 4,268,600
Population density: 40.9 per square kilometer
Capital: Wellington
Head of State: Queen Elizabeth II
Head of Government: Prime Minister John Key
Currency: New Zealand Dollar (NZD)
Main imports: machinery and equipment, vehicles and aircraft, test products, petroleum, electronic products, textiles, plastics
Main exports: Russell Crowe, ore and metals, wool. Food and livestock, fuel, transportation machinery and equipment
Import partners: Germany 13.5%, US 10.2%, France 8.1%, Netherlands 6.3%, Belgium 4.9%, Italy 4.7%
Export partners: US 15.7%, Germany 10.5%, France 9.5%, Netherlands 6.9%, Ireland 6.5%, Belgium 5.6%, Spain 4.4%, Italy 4.4%
Time zone: East 12th
Website: http://www.newzealand.govt.nz

Economic overview

Because of its small population, New Zealand’s economy is also relatively small. New Zealand’s GDP in 2011 was US$123 billion, ranking 65th among all economies in the world. But don’t underestimate New Zealand, it plays a very important role in world trade.

New Zealand’s economic activities rely mainly on trade, especially with the Southern Continent (Australia), the Rising Sun (Japan), and Uncle Sam (United States). Its economy is an export-oriented economy, with major export commodities such as ore, metals and wool accounting for a third of New Zealand’s GDP. It also exports cattle and dairy products. Does Angers Beef sound familiar?

New Zealand’s main industries include agriculture and tourism, while its manufacturing and technology sectors are small. Therefore, the goods it imports from other countries include heavy machinery, equipment, vehicles and electronic products.

Since New Zealand has lifted many barriers to foreign investment, the World Bank has praised New Zealand as the world’s second best business friendly country after Singapore.

Monetary and fiscal policy

The Reserve Bank of New Zealand (Bank of New Zealand) controls the country’s monetary and fiscal policies. At present, the bank’s president is Bernard, and the New Zealand Federal Reserve holds eight monetary policy meetings each year. The central bank’s task is to maintain price stability, determine interest rates and monitor output and exchange rates. In order to maintain price stability, the New Zealand Federal Reserve must ensure that the annual inflation rate reaches the 1.5% standard set by the central bank, otherwise the government has the right to fire the Governor of the Reserve Bank of New Zealand (we are not kidding).

The Federal Reserve Bank of New Zealand has the following monetary policy tools:

The official discount rate is determined by the Chairman of the Reserve Bank of New Zealand and will affect the short-term interest rate level. Borrowing at 25 points above the official discount rate, and borrowing at 25 points below the interest rate, the central bank can regulate the interest rates of individuals and businesses.

Open market operations are to achieve cash goals or the amount of reserves kept in commercial banks. By predicting the cash target daily, the New Zealand Federal Reserve can calculate how much money must be injected into the economy to meet its target.

Understanding NZD

The nickname for the New Zealand dollar (NZD) is “kiwi”. It is a bird. Kiwi is a symbol of New Zealand… but let’s take a look at the country’s currency called Kiwi and its interesting features.

Let me see these products!

Since New Zealand’s economy relies on the export of commodities and agricultural products, the country’s economic performance and commodity prices are closely related.

If the price of commodities rises, the price of New Zealand’s export commodities will increase accordingly, which will contribute more GDP to the country. High GDP indicates that the economy is performing well, which will cause the New Zealand dollar to appreciate.

Conversely, a decline in commodity prices means that the total price of exports has fallen and the contribution to GDP has become smaller. Low GDP will cause the New Zealand dollar to depreciate.

I go hand in hand with the Australian dollar

Because Australia is New Zealand’s number one trading partner, Australia’s economic performance has a significant impact on New Zealand’s economy.

For example, when the Australian economy is performing well, Australian companies will increase import activity. Guess who will benefit from it? Of course it is New Zealand!

…Like the Australian dollar, I enjoy arbitrage trading!

Like Australia, New Zealand has higher interest rates than other economies such as the United States, the United Kingdom, and Japan.

The difference in interest rates between economies is an indicator of capital flows. Because investors favor high yields, they sell low-yield investments and buy high-yield assets or currencies. In other words, the higher the interest rate, the higher the inflow of funds.

I want more immigrants

Because the population of New Zealand is less than half the population of New York, the increase in immigration has a huge impact on the country’s economy. This is because the population has increased and the demand for and consumption of commodities has increased.

I am also sensitive to the weather

New Zealand’s economy is heavily influenced by agriculture, which means that severe weather conditions, such as drought, have a great negative impact on the country’s economy. Heat waves can also affect Australia and cause forest fires, resulting in a loss of 1% of their GDP. This is not good for New Zealand.

Important economic indicators related to New Zealand dollars

Gross Domestic Product (GDP): Like other countries, GDP is part of New Zealand’s economic report. GDP is used to measure the overall performance of New Zealand’s economy and will affect New Zealand dollar demand.

Consumer Price Index (CPI): CPI measures changes in price levels. As an index for measuring inflation, it is closely watched by the Reserve Bank of New Zealand to determine changes in monetary policy. Its purpose is to keep prices stable, remember?

Trade balance: New Zealand’s economy is an export-oriented economy, and trade balances are often checked in transactions to determine international demand for products produced in New Zealand.

What factors caused the New Zealand dollar to change?

Economic Growth

The positive GDP growth reflects New Zealand’s good economic situation, which will increase the demand for New Zealand dollars. Negative GDP growth data indicates that the country’s economic performance is poor and will reduce demand for New Zealand dollars.

Surge in exports

High demand for New Zealand products usually means high GDP, which in turn encourages the New Zealand dollar to appreciate. On the contrary, the low export volume contributes less to GDP, which will cause the depreciation of the New Zealand dollar.

Commodity prices rise

The rise in commodity prices has led to an increase in New Zealand’s total exports, which in turn has boosted GDP. Declining commodity prices will lead to a reduction in total exports, which will lower GDP.

NZD/USD trading

The NZD/USD trading position is measured in US dollars.

The value of each point is calculated based on the current price of NZD/USD (four decimal places are one point).

Gains and losses are denominated in US dollars. For a position of 100,000 units of NZD/USD, the value of each change is $10. For a 10,000 unit NZD/USD position, each point of change is 1 USD.

The calculation of margin trading is based on US dollars. For example, if the current exchange rate of NZD/USD is 0.7000, the leverage ratio is 100:1.

You need $700 to trade a position of $100,000. It takes US$70 to trade a position of NZD 10,000.

See, because the value of the New Zealand dollar is lower than the US dollar, it requires the least amount of margin in all major currencies. This means that trading New Zealand dollars is cheaper.

NZD/USD trading tips

New Zealand’s strong economic report will prompt the appreciation of the New Zealand dollar. If the probability of a good economic report is greater, this means that the NZD/USD long should be done.

The poor performance of the economic report will cause the depreciation of the New Zealand dollar. If the future economic report is lower than expected, this means that NZD/USD short positions should be made.

In addition to paying attention to economic reports, paying attention to commodity price behavior can also provide signals for NZD/USD trading.

In most cases, when demand for high-risk assets is strong, commodity prices rise. At this time, investors will invest their funds in high-yield assets, such as gold and other commodities, and sell low-yielding dollars. Therefore, the commodity-based New Zealand dollar will rise sharply compared to the safe haven dollar.

On the other hand, when risk aversion forces investors to escape to a safe haven, the New Zealand dollar depreciates compared to the US dollar.

Like Australia, NZD is one of the excellent candidates for arbitrage trading. Arbitrage trading involves buying high-interest-rate currencies and selling low-interest-rate currencies. New Zealand’s higher interest rate support rate is the New Zealand dollar arbitrage transaction.