In 1967, the New Zealand Dollar came into existence and was initially pegged at 1.62 against USD. Its rate had changed multiple times till 1985 before it started to float freely in the market. Currently, the market quote for NZD had peaked to 0.88 against USD and had fallen to 0.68 in 2015. NZD/USD exchange rate forecast depends on a lot of factors, and proper analysis may allow you to reap substantial profit with this currency pair. Although it’s not one of the most transacted pairs, NZD does not show large variations and is considered a safe currency for investment.
How can economy affect NZD/USD exchange rate forecast?
A country’s economy goes a long way to deciding its currency’s valuation. A growing economy attracts more foreign investors while GDP influences economic strength. Here is how NZD valuation may change depending on the country’s income.
New Zealand’s exports account for about 30% of its GDP. This agriculture based country is heavily dependent on exports, mainly to Australia which in turn supplies the Asian countries. Increased exports will result in increased inflow of foreign currency, thereby increasing NZD valuation.
Similar concept works with tourism. NZ promotes its tourism to quite an extent and accounts for 15.3% of its income. Tourists bring in foreign money, which is converted to NZD. Increased tourism will create a demand for NZD, thereby affecting valuation.
The GDP growth rate of NZ stands at 3.3% as of 2015. While conducting NZD vs USD exchange rate forecast, this factor is taken into account along with employment rate and other econometric tools. A steady growth rate will show an increase in forecast evaluation and thereby attract more investors.
Also, a growing economy will attract foreign investors in the market. If investors come in, they have to exchange their currency to NZD, and in turn, will increase its demand and valuation.
Thus, with your eyes on these factors, you may end up earning more than trading with Japanese Yen or Euros. Economy-analysis is a part of forex fundamental analysis and goes a long way in predicting the market.
How can you increase your return?
If the NZD market shows signs of improvement with NZD vs USD exchange rate forecast, then it is wiser to sell your Euros and invest here. Brexit and Debt Crisis are bound to affect Euro valuation, and NZD will hardly fluctuate much. Also, a lower valuation than Euro, you can buy more NZD with the same amount and generate more return for the similar market shift.
Another option is carried trade. Japan lends out its Yen at very low-interest rates, and you can borrow Yen to convert it to NZD. Aussie Dollar is priced slightly higher than NZD and more money lent out will fetch you higher difference of interest, hence proving higher returns.
So, keep yourself updated about a growing economy as these tend to generate higher returns. Consider the factors mentioned here to perform your own NZD/USD exchange rate forecast. Make use of the charts and plots available online. Economy is just one of the factors, so find out more about forecasting. Invest safe and wisely.