The AUD/NZD pair is an instrument to demonstrate the amount of New Zealand dollars (NZD) that can be bought for one Australian dollar (AUD) in the Forex trading market.
Commodity trading plays a key role in evaluating both AUD and NZD, as each country is rich in natural resources.
Not many people know that Lord Rutherford’s profile is depicted on a 100 New Zealand dollar banknote. This famous New Zealander was the first to split an atom and discover mankind’s nuclear energy. It is noteworthy that the country, although it remembers its hero, has completely abandoned nuclear energy.
Australia is the third-largest gold producer in the world, so the international value of gold plays a key role in determining the value of AUD. Iron, coal, aluminum and many agricultural products, including livestock and wool, are also exported.
Despite the raw materials and industrial sectors, most people associate Australia with kangaroo and New Zealand with kiwi bird. Therefore, in the west, the pair is often called kiwi kangaroo.
With a strong agricultural sector and an abundance of its resources, New Zealand’s most profitable product is its dairy products, with agricultural exports accounting for 24 percent of the country’s gross domestic product each year. Other valuable products include meat, fish, fruit, and wool.
In 2010, NZD accounted for 1.6% of daily transactions in the Forex market. At the same time, AUD took seventh place among the most traded currencies. Turnover averaged 5.3% of transactions. In subsequent years, the popularity of NZD began to decline, while the Australian dollar continued to be in great demand.
As a rule, both currencies benefit from a strong commodity market, in which performance in the characteristic of the respective good of each country plays a key role in establishing the relationship of the AUD/NZD pair.
How to trade
The New Zealand and Australia currencies are highly dependent on the movement of the US dollar (USD) and the impact of China’s economic activity, as it is the largest trading partner for both countries.
The exchange rate of the Australian dollar against the New Zealand dollar mainly demonstrates stability. Vibrations, if any, are extremely slight.
You can see the situation by studying the monetary policy of New Zealand. Monetary policy is usually described as the way the country’s Central Bank controls the supply of money to enterprises and people to manage economic factors such as growth and inflation.
Monetary policy in New Zealand is controlled by the Reserve Bank of New Zealand (RBNZ), which sets prevailing interest rates every six weeks through the “Official Cash Rate” (OCR).
It is an interest rate at which New Zealand banks can borrow money from the RBNZ to carry out daily operations. The RBNZ is responsible for maintaining inflation from 1% to 3%. As of July 2019, the RBNZ has not changed OCR since November 2016.
The considered example shows that the economies of both countries are very stable and not subject to significant fluctuations, so the pair is rarely considered by professional traders.
On the other hand, small exchange rate fluctuations occur regularly. Operating with large capital, you can extract a good margin from these fluctuations with minimal risk of losing funds.