New Zealand is a relatively small country, so it might be somewhat unexpected that the New Zealand currency is the 10th most traded currency in the world. Adding to that is the fact that the New Zealand dollar has only been in existence since 1967, making it one of the younger currencies.
This naturally brings up the question of how it become so prominent so quickly. In this article, we will discuss the origins and evolution of the New Zealand dollar, where it is used and how it is related to the Australian dollar, and take an in-depth look at the coins and banknotes. But before we delve deeper, we should start with the basics.
The New Zealand currency is the New Zealand dollar, controlled and monitored by the Reserve Bank of New Zealand - the New Zealand central bank. The New Zealand currency symbol is $, although NZ$ is often used to differentiate it from other dollar-based currencies like the Hong Kong dollar and Singapore dollar.
The ISO code is NZD. The ‘Kiwi’ and ‘Kiwi dollar’ is the nickname of New Zealand’s currency, both because the indigenous bird is a symbol of New Zealand and because the kiwi bird is depicted on the reverse of the 1 NZD coin.
One New Zealand dollar is subdivided into 100 cents. New Zealand dollar coins come in denominations of 10, 20, and 50 cents and 1 and 2 NZD. New Zealand currency banknotes come in denominations of 5, 10, 20, 50, and 100 NZD.
Two series of NZD are currently in circulation – the 1999 and 2015-2016 series. The New Zealand dollar bills prior to 1999 were paper notes and the post-1999 series use polymer notes with enhanced security features.
All New Zealand dollar banknotes have a thematic design, depicting New Zealand birds on the reverse (alongside other images). Namely:
Alongside the kiwi found on the NZ$ 1 coin and the great egret (kotuku) found the NZ$ 2 coin, all New Zealand legal tender denominated in dollars depicts birds. Only the 10, 20, and 50 cent coins do not have images of birds.
The New Zealand dollar is a much more popular currency than the size of the country or its annual GDP would suggest. According to the latest Triennial Central Bank Survey of the Bank of International Settlements, the NZD is the 10th most traded currency in the world on a net-to-net basis and holds 2.1 percentage shares of the average daily turnover.
Concerning the value of the NZD against the dollar, 1 USD is worth approximately 1.47 NZD as of November 16th, 2021. But, as exchange rates often change, it is always best to use a currency converter to check the current rates.
The New Zealand dollar is the official currency and legal tender of New Zealand, but it is also used in the countries of Niue and the Cook Islands, the British Overseas Territory of the Pitcairn Islands, and the dependant territory of New Zealand – Tokelau.
The currency in New Zealand from 1840 to 1967 was the pound. One pound was subdivided into 20 shillings, with there being 12 pence per shilling. Due to the Great Depression and the effect it had on export to the UK, the New Zealand pound was devalued to 16 shilling per pound by Australian banks, which controlled the exchanges with the UK.
Thus, the New Zealand pound became distinct from the pound sterling in 1933. In 1948, the New Zealand pound appreciated and was restored to the value of 12 shillings per pound sterling. However, in the 1950s, plans to decimalize New Zealand currency started to gain traction.
The New Zealand Government set up a committee to investigate decimal currencies in 1957 and by 1963 the decision was made to decimalize it. The Decimal Currency Act of 1964 prescribed that the currency would be decimalized by 1967.
The name of the new New Zealand currency wasn’t yet decided, and names such as ‘kiwi’ and ‘fern’ were proposed. Eventually, the name ‘dollar’ was chosen (although ‘kiwi’ remains the unofficial name) and that is how the New Zealand dollar became the official currency in 1967. When it was introduced, the NZD replaced the pound at a rate of 2 NZD = 1 pound.
When it was introduced, the NZD was pegged to the USD, at a rate of 1.43 USD = 1 NZD. Later that year the peg was changed to 1.12 USD = 1 NZD. By December of 1971 and the devaluation of the USD in relation to gold, the NZD was pegged to the USD at a rate of 1.216 USD = 1 NZD with a fluctuation range of 4.5%.
Soon after, in 1973, the NZD released its peg to the dollar and its value was determined against a trade-weighted basket of currencies. Finally, in 1985, New Zealand instituted a floating exchange rate and the value of the NZD has been determined by the financial markets since.
While there are many factors that determine the value of a currency, the New Zealand dollar is highly correlated to the Australian dollar and the Australian economy, as Australia is New Zealand’s second-largest trading partner. The NZD/USD and AUS/USD forex pairs have a correlation coefficient of +0.90. This correlation coefficient ranges from -1 to +1.
What this means is that the NZD/USD and AUS/USD pairs will most often move in tandem. If the correlation was +1, then they would always move in the same direction and by the same percentage. Conversely, a negative correlation coefficient of -1 would mean that they always move by the same percentage in opposite directions.
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