Is the New Zealand dollar worth investing in? New Zealand dollar(NZD) Investment Guide and Risk Assessment

What is the New Zealand Dollar? Why is it classified as a commodity currency?

The New Zealand Dollar (currency code: NZD), has adopted a floating exchange rate system since 1985, with the Reserve Bank of New Zealand ceasing to publish official buy and sell rates, allowing market forces to determine exchange rate movements. As one of the most traded currencies globally, NZD/USD ranks among the top ten in international forex trading.

The Australian Dollar and New Zealand Dollar are often referred to as “commodity currencies” by market participants. Both countries are typical export-oriented economies, with major industries including coal, iron ore, copper, aluminum, wool, and agricultural products. As a result, the exchange rates of the NZD and AUD often move in tandem with international commodity prices. New Zealand, in particular, relies heavily on exports of agricultural products, dairy, and wool, which account for over two-thirds of its total exports.

NZD Trend Analysis: Why is it continuously declining?

The performance of the New Zealand Dollar against the US Dollar has faced multiple pressures in recent years. According to market data, since reaching a historical high of 0.88 in 2014, the NZD has fallen to above 0.5 USD, with a cumulative depreciation of 32%.

Main factors influencing the NZD trend include:

First, fluctuations in global agricultural prices. New Zealand’s economy is heavily dependent on exports of agricultural products, dairy, and wool. When prices for these commodities fall, the NZD, as a commodity currency, also comes under pressure, reflecting market pessimism about New Zealand’s economic outlook.

Second, the decline of the tourism industry. Tourism is a vital pillar of New Zealand’s economy. Since the outbreak of the global pandemic, international travel demand has plummeted, severely impacting the service sector and foreign exchange income.

Third, the impact of Federal Reserve policies. The Fed’s interest rate hike cycle has strengthened the US dollar, widening the interest rate differential between the US and New Zealand. When the dollar appreciates, investors tend to shift funds into USD assets, putting downward pressure on the NZD.

Fourth, global sudden events shocks. Any global crises (such as pandemics or geopolitical conflicts) directly impact New Zealand’s export-dependent economy, further dragging down the NZD performance.

NZD Outlook and Investment Considerations

According to mainstream investment bank forecasts, the NZD is expected to face significant downside pressure:

• Within six months: 0.594
• Within one year: 0.5934
• Within three years: 0.5834

In the long term, amid slowing global economic growth, the NZD may enter a bear market. However, investors should not be overly bearish. When global risk assets are in high demand, commodity prices tend to rise accordingly. During such times, investors may increase allocations to the NZD and other commodity currencies, and the NZD against safe-haven currencies like the USD could appreciate.

Currently, the US dollar shows resilience in the market. Traders should closely monitor the policies and interest rate trends of the Federal Reserve and the Reserve Bank of New Zealand as key references for adjusting positions.

Four Ways to Invest in the NZD

1. NZD Fixed Deposit

Exchange TWD to NZD through local banks and deposit into a fixed-term account. Upon maturity, receive NZD interest income, then convert back to TWD at the prevailing exchange rate. This method carries lower risk, is familiar to users, but offers limited returns, making it suitable for conservative investors seeking stable income.

2. NZD Funds

NZD funds are professional forex investment products managed by fund managers. Due to the high volatility of the NZD exchange rate, these funds entail higher risk and potential returns, suitable for investors willing to accept fluctuations.

3. NZD Futures

NZD futures are traded on the Chicago Mercantile Exchange (CME), with the product code NE. The minimum tick size is 0.0001, with a tick value of $10. Futures use margin trading and allow for both long and short positions, but carry risks of margin calls, liquidation, or stop-outs. Futures contracts have fixed delivery dates, so rollover considerations are necessary.

4. Contract for Difference (CFD)

CFDs are settlement agreements based on the price difference between opening and closing positions, without physical delivery. Compared to futures, CFDs require less margin, offer higher capital efficiency, and enable “small capital, big gains.” The main advantage is high flexibility, allowing long-term positions without rollover, and supporting two-way trading. For commodity currencies like the NZD, which have relatively predictable trends, short-term CFD trading can provide more profit opportunities.

Choosing the Right Investment Tool

Taiwanese investors have limited options in forex futures. CFDs are favored worldwide by retail investors for their flexibility, low costs, and diverse underlying assets. Through CFD platforms, investors can trade multiple NZD currency pairs such as NZDUSD, GBPNZD, EURNZD, and adjust their trading strategies flexibly according to market conditions.

Before investing in NZD, it is essential to fully understand the risk characteristics of each investment tool. It is recommended to start with demo trading and then proceed with real funds.