New Zealand's currency is known as the New Zealand dollar. It's sometimes referred to as the "kiwi." The currency was decimalized in 1967 and divided into 100 parts or cents. The currency was called the New Zealand pound before that decimalization.
Key Takeaways
- The New Zealand currency is the New Zealand dollar.
- The currency circulates in New Zealand, Tokelau, Pitcairn Islands, Niue, and the Cook Islands.
- Bill denominations include $5, $10, $20, and $50.
- Coins include 10c , 20c, 50c. $1, and $2.
- Agriculture prices, tourism numbers, and RBNZ decisions influence the New Zealand currency.
New Zealand Currency Background
The New Zealand dollar trades under the symbol NZD or NZ$. Itfloatedon March 4, 1985, at an initial exchange rate of 44 cents against the U.S. dollar. The financial markets have since determined the currency’s value with the unit typically ranging between 39 and 88 cents against the greenback.
The kiwi also circulates in Tokelau, Pitcairn Islands, Niue, and the Cook Islands in addition to being the official currency of New Zealand. New Zealand bill denominations include $5, $10, $20, $50, and $100. Coins include 10c, 20c, 50c, $1, and $2.
New Zealand Currency Banknotes
The New Zealand government has produced polymer or plastic versions of the New Zealand dollar since 1999. This has made bills more secure against counterfeiting. The polymer composition has also increased the longevity of the banknotes. Polymer bills are estimated to last four times longer than regular linen or paper banknotes.
Polymer bills can go through a washing machine without suffering any material damage. The Reserve Bank of New Zealand (RBNZ) updated the currency in 2015 with even more bright colors and improved security features.
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Reserve Bank of New Zealand's Impact on the NZD
The RBNZ is New Zealand's central bank. It's responsible for making monetary and fiscal decisions that impact New Zealand's currency. The RBNZ holds monetary policy meetings seven times a year to maintain price stability, set interest rates, and monitor exchange rates.
Factors That Influence the New Zealand Currency
New Zealand is rich in natural resources. The country's top industries include agriculture, dairy, forestry, fishing, mining, and tourism. New Zealand is one of the world’s largest exporters of whole milk powder so the NZD would most likely benefit if milk prices rise.
Tourism accounted for about 3% of the country’s gross domestic product (GDP) in March 2022, a decrease from 5.5% before the COVID-19 pandemic.
The kiwi took a tumble on Aug. 17, 2020, falling 1.5% to $0.69 after a case of COVID-19 was discovered, New Zealand's first in six months.
New Zealand Dollar's Relationship With Australia
Australia ranks as New Zealand's second-largest trading partner behind China. The neighboring country reports 6.2% of New Zealand imports in 2023. The performance of Australia’s economy has a significant impact on the New Zealand dollar as a result.
New Zealand Currency and the Carry Trade
Traders and investors have favored the New Zealand dollar as a carry trade currency because the country has had higher interest rates compared to other developed nations.
The carry trade is one of the most popular trading strategies in the currency market. Executing a carry trade involves nothing more than buying a high-yielding currency and funding it with a low-yielding currency.
Traders purchase the New Zealand dollar and sell a lower-yielding currency to execute a carry trade, such as the Japanese yen. The objective is to profit from the interest rate differential. But the New Zealand carry trade has become much less appealing as the RBNZ has aggressively reduced interest rates to combat slowing economic growth and subdued inflation.
What Does It Mean When a Currency Is Floated?
A floating currency is one with value that is permitted to change as it's compared to other currencies.
What Is Gross Domestic Product?
Gross domestic product is a measurement of the value derived from a country's production of goods and services over a specific period. The value includes income earned from production.
What Is New Zealand's Third Largest Trading Partner?
The United States was New Zealand's third largest trading partner behind China and Australia as of December 2023. New Zealand imports from the U.S. reached $4.17 billion in 2022.
The Bottom Line
New Zealand’s currency is the dollar, more affectionately known as the kiwi. As the country’s central bank, the Reserve Bank of New Zealand (RBNZ) controls most facets of the currency because it sets and monitors exchange and interest rates. Investors once favored the New Zealand dollar as a carry trade currency but the New Zealand carry trade has become less appealing as the RBNZ has aggressively reduced interest rates to combat slowing economic growth and subdued inflation.
