NZD (New Zealand dollar) USD (United States dollar) forex rate can be defined as the rate at which the NZD is exchanged for the USD. NZD USD forex rate can also be seen as the value of one country’s currency (NZD) when compared to another country’s currency (USD). The NZD USD forex rate is determined in the forex market which is the biggest financial market in the world where different forex traders buy, sell and convert currencies.
They are various forms of NZD USD forex rate. Fixed NZD USD forex rate is said to be used when there is no form of fluctuation or changes in the price of one currency when compared to another. This means that the exchange rate of NZD to USD remains unchanged and static. The second form of NZD USD forex rate is floating rate which is when there is massive fluctuation on the value of one currency when compared to another currency. This means that there is an existence of an ever changing situation when viewed in terms of value of NZD when compared to the USD.
ADVANTAGES AND DISADVANTAGES OF NZD USD FOREX RATE
ADVANTAGES OF FIXED NZD USD FOREX RATE
Certainty: the use of fixed NZD USD forex rate helps forex traders to always ascertain the exact exchange rate of the NZD currency when compared to the USD. This certainty makes forex trading easy and without any form of stress.
Absence of speculations: When making use of the fixed NZD USD forex rate. There is a total absence of speculations since forex traders believe that the forex rate will remain static and stay fixed without any form of revaluation and devaluation.
Constrain on government policy: Because of the fact the NZD USD forex rate is fixed, the government will be unable to impose macroeconomic policies.
DISADVANTAGES OF FIXED NZD USD FOREX RATE
When forex traders make use of a fixed NZD USD forex rate, they will be a lack of respond to the shock and this means that they will be no mechanism for the government to rapidly react to balance of payment crisis. This fixed NZD USD forex rate may not be compatible with factors like economic targets for growth, a countries unemployment or inflation.
ADVANTAGES OF FLOATINGNZD USD FOREX RATE
Protection from outside shocks: when there is a free floatation of NZD USD forex rate, they will be an option for a change in response to external shocks. It eliminates the undesirable impact caused by any form of outside shocks.
Lack of constrains on government policies: government policies are free to be exerted on floating NZD USD forex rate. These policies are free to be carried out on platforms that are considered appropriate for the domestic economy without any form of worries that they will conflict with different external policies
DISADVANTAGES OF FLOATING NZD USD FOREX RATE
Floating NZD USD forex rate are usually affected by a large rate of fluctuations in the value of a currency which leads to uncertainty for various forex trading firms. It also have a lot of speculations and constrains on domestic policies.
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