Why did New Zealand move from pounds to dollars?
New Zealand’s national currency is the New Zealand dollar (NZD). New Zealand’s $1 coin features a flightless bird native to the country, the Kiwi, which appears on the country’s currency. Despite sometimes being shown as NZ$, the Kiwi dollar is more commonly represented with a simple $ sign which distinguishes it from other US-based currencies. The New Zealand dollar is used by the Cook Islands, Niue, Tokelau, and the Pitcairn Islands.
Quick info
When the New Zealand dollar took the place of the New Zealand pound in 1967, it was decimalized (divided into 100 cents) at a ratio of two dollars to one pound. From the NZ dollar’s inception, it fluctuated based on fixed exchange rates until March 1985, when it was allowed to float freely.
Why did NZ change its currency to dollars?
The history of New Zealand’s currency is long and illustrious, spanning over 160 years. Throughout the 1800s, New Zealand even issued its own coins and banknotes before British money became legal tender. There was no official currency until 1933 when New Zealand issued its first official coins based on the British pound, shilling, and pence. New Zealand’s official currency was the NZ pound before the arrival of the NZ dollar, with 1 pound equal to 20 shillings and 1 shilling equal to 12 pence.
On the face of the country’s $1 coin, you can see a flightless bird called the Kiwi, the name given to the New Zealand dollar. Initial coins depicted images of birds native to New Zealand, a tradition that has persisted, with the “head” face featuring the British monarchy.
New Zealand’s Reserve Bank of New Zealand became the country’s sole issuer of banknotes in 1934. Among the original designs were Kiwis, the nation’s coat of arms, Maori King Tawhiao, and Fiordland’s Mitre Peak.
When did New Zealand go to the dollar?
After waiting 30 years, the Reserve bank finally replaced the currency of pounds, pence, and shillings with real dollars and cents. There were 27 million new banknotes and 165 million new coins created by the Bank in 1967 itself.
New Zealand dollar money has a rich history of vibrant and striking designs, and its print has undergone several changes over the years. The images of Queen Elizabeth have been changed on all banknotes since 1992. The notes are printed with notable New Zealanders such as Edmund Hillary, Kate Sheppard, Apirana Ngata, Ernest Rutherford, and native bird and plant images.
Since 1999, the New Zealand government has released polymer or plastic versions of its currency to make it more resistant to counterfeiting. Furthermore, the improved polymer composition has increased the lifespan of the currency notes.
Polymer notes are designed to last four times longer than ordinary linen notes or other paper notes. Polymer notes are surprisingly washable without harming the substance. The currency received its latest version in 2016, which featured even brighter colours and more security features.
What is the correlation between NZD and USD?
The NZD/USD pair value is given as 1 New Zealand dollar for X US dollars. With the price of the pair at 0,63, it takes 0,63 US dollars to purchase one New Zealand dollar. The NZD/USD rate is impacted by factors such as how the New Zealand dollar and the US dollar compared to one another and to other currencies.
This will eventually impact the relative value of these currencies due to the interest rate disparity between the New Zealand Reserve Bank (RBNZ) and the Federal Reserve (Fed). With the US dollar strengthening against the New Zealand dollar, the NZD/USD cross value may fall whenever the Fed engages in open market operations to boost the US currency. New Zealand dollars are considered carry-trade currencies because they produce a high return. For this reason, investors often purchase it and finance it with a currency with a lower interest rate, such as the Japanese yen or Swiss franc.
In 2008 and 2009, the New Zealand dollar was one of several high-yielding currencies that fell during the financial crisis. The NZD/Japanese yen exchange rate gradually increased margin trade holdings in 2007 and 2008, as Japanese investors benefited from the large interest rate disparity between Japan and New Zealand. Over 90% of those long positions were cut by margin traders in Japan between late 2008 due to volatility in global markets. Another two factors that affect the New Zealand Dollar are dairy prices and visitor numbers. New Zealand is among the world’s leading suppliers of whole milk powder.
In other words, increasing milk prices will likely result in a positive effect on the New Zealand financial system, which will increase the currency. The tourism industry is also important to New Zealand’s economic health. As a result, the economy flourishes, and the value of the currency increases as tourists flock to New Zealand.
What is at the root of the New Zealand Dollar’s strength?
NZD’s value might not remain as strong forever since the currency’s value fluctuates. Despite this, the NZD is seen as a stable currency because of the stability and future prospects of the New Zealand economy. In New Zealand, tourism is a major economic driver, so the currency tends to strengthen when the industry is doing well. Furthermore, other economic variables, such as the growth rate, GDP, unemployment, and inflation, are strong, making the currency strong.
Summary
New Zealand dollars are among the world’s most traded currencies as it is accepted worldwide. You can make online payments using NZ dollars on mostly all international retailers. Kiwis can even play in casinos with NZ dollars. Consequently, the New Zealand dollar influences the foreign exchange markets in NZ. The presence of multinational companies and investors in New Zealand is due to international businesses searching for yields. As a result, currency swaps have been used to minimize foreign exchange risks. In New Zealand, exports and imports have been large parts of the economy and the borrowing from overseas markets by NZ companies and organizations. The FX turnover for New Zealand is very high, especially compared to its GDP.