Forecast for NZD (New Zealand Dollar) in 2022
This article looks at the trend in the New Zealand Dollar forecast in 2022.
Bank forecasts for the New Zealand Dollar in 2022
- The New Zealand Dollar rose to its highest level in over three years against the US dollar at the start of 2021, before falling. The pair ended 2021 around its lowest level for the year.
- Analysts are more optimistic about the outlook for the New Zealand Dollar in 2022, broadly agreeing that NZD/USD could rise.
- Analysts at ING consider that a strong recovery in the New Zealand economy, particularly in tourism and education, will help to push the value of the kiwi higher.
- Analysts at Westpac also expect strong levels of economic activity in New Zealand in 2022 which could help lift the New Zealand Dollar. They predict that New Zealand will see a full recovery in the economy, from the pandemic, by mid 2022.
- Whilst Citibank expects the New Zealand Dollar to rise against the US Dollar over the coming 6-12 months, analysts at the bank warn that the New Zealand Dollar could be at risk if fears surrounding Omicron rise.
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What’s the impact of a weak New Zealand Dollar (NZD)?
- A weak New Zealand Dollar can be both good and bad for the New Zealand economy. A weak New Zealand Dollar is good news for exporters in New Zealand as their products and services become more competitively priced abroad. However, at the same time importers in New Zealand have less buying power with a weaker currency.
- China is New Zealand's largest trading partner. Other major trading partners include the US, Australia and Japan. Therefore these are the economies most likely to be affected by a weaker New Zealand Dollar.
What’s the impact of a strong New Zealand Dollar (NZD)?
- A strong NZD means that New Zealand has greater buying power across international markets, which is important for importers of components for products and fuel. Meanwhile, a stronger New Zealand Dollar is a problem for exporters, as demand for the products and services abroad often falls as the price rises.
What are the key influences on NZD forecasts in 2022?
- The New Zealand Dollar is considered to be a riskier currency. This means that when confidence in the global markets is high the Zealand Dollar often rises. When the mood in global financial markets deteriorates the New Zealand Dollar often falls.
- In addition to the broad market mood, the New Zealand Dollar can be moved by economic and political factors in addition to movements in other currencies.
1. US Economy
- The New Zealand economy is rebounding after suffering a hit from the pandemic. Domestic economic strength is helping the recovery from lockdowns in Auckland in 2021.
- Tourism and education are two key areas of the economy which are helping with the recovery story.
- The New Zealand Dollar is often called a commodity currency, this is because New Zealand has many natural resources and is a major exporter of agricultural products. The performance of these exports can influence the movement in the New Zealand Dollar.
- When government policies are considered to slow economic growth then the New Zealand Dollar could fall. This was evident in 2021 when COVID lockdown restrictions were imposed. Should more COVID restrictions be imposed in 2022 then the New Zealand Dollar could fall.
- Similarly, when government policies are deemed supportive of the New Zealand economy, the value of the New Zealand Dollar often rises.
3. Other currencies
- The US Dollar can significantly influence the value of the New Zealand Dollar. Often when the US Dollar rises the New Zealand Dollar will fall and vice versa.
- There is also a close correlation between the Australian Dollar and the New Zealand Dollar, they are both called commodity currencies. Often when the Australian Dollar rises, the New Zealand Dollar rises and when AUD falls, NZD often falls as well.
NZD/USD performance in 2022
- Analysts at Westpac predict that NZD/USD will rise to 0.69 by the final three months of 2022.
- ING is even more upbeat about the prospects for the NewZealand Dollar and sees NZD/USD rising to 0.74 by the end of next year.
- The New Zealand economy is recovering well and interest rates were increased to 0.75% in the final meeting of 2021. Interest rates in the US haven’t risen yet giving the New Zealand Dollar an advantage over its US peer.
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NZD against other currencies
- Whether the pound strengthens against the New Zealand Dollar in 2022 could depend on how both economies perform.
- UK economic growth showed signs of slowing at the end of 2021, should this trend continue into 2022, the pound could struggle against the NZD.
- The New Zealand Dollar traded between a tight range across 2021, rarely moving above 54 or below 51.
- The pair could continue to move in a similar fashion in 2022 if the economic recovery in the two economies continues in a similar fashion.
- The New Zealand Dollar strengthened against the Japanese yen in 2021. As the mood in the global markets improved amid the economic recovery from the pandemic, investors sold out of the Japanese yen.
- The yen is considered to be a safe haven currency, and so it loses allure when the mood improves in global markets.
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