New Zealand Dollar Performance in August 2024: Foreign exchange rates were settled at the end of trading in August 2024 on Friday, August 30. The New Zealand currency had an impressive performance during the month, outperforming most major and minor currencies. The buying activity of the New Zealand dollar increased, as it was considered the best investment available. This is due to the weak chances of additional New Zealand interest rate cuts this year. With the improving domestic economy and business confidence rising to a ten-year high, it has become more likely that the Reserve Bank of New Zealand will adopt a more aggressive approach to cutting interest rates.
The improvement in risk sentiment in global financial markets also contributed to the gains of the New Zealand currency. This coincided with the imminent start of the monetary easing cycle in the United States, the world’s largest economy.
The performance of major currencies in August 2024: The New Zealand Dollar shines, and the US Dollar retreats: In August 2024, the US dollar was the last of the gainers, due to the acceleration of open selling operations. The moves came after dovish comments from Federal Reserve Chairman Jerome Powell at the Jackson Hole Forum, which boosted the chances of a significant rate cut by the US starting in September.
Before we look at the reasons that supported the New Zealand dollar and significantly affected the US dollar, we review the performance of the eight major currencies in the foreign exchange market during July 2024.
The New Zealand dollar recorded a 10-point increase in the monthly “FX News Today” index measuring the strength of currencies. The Australian dollar came in second with a 4-point increase, while the Swiss franc came in third with a 3-point increase..
Notable gains against major currencies
Notable outperformance against the US dollar: In August, the New Zealand dollar recorded a remarkable performance against the seven major currencies. The New Zealand dollar outperformed the US dollar by 5.4%, posting its biggest monthly gain in 2024. This performance represents the biggest increase since November 2023. On Thursday, August 29, the New Zealand dollar hit a seven-month high of 62.99 cents. Notable gains against major currencies: The New Zealand dollar had a strong performance during August, posting notable gains against most major currencies. It rose 2.95% against the euro, its biggest monthly gain since September 2023, and on Thursday, August 29, it hit a seven-week high of $1.7651. In addition, the New Zealand dollar rose 2.9% against the British pound, posting its biggest monthly gain since August 2023. On Thursday, August 29, it hit a seven-week high of $2.0981. The New Zealand dollar also rose 2.65% against the Canadian dollar, its biggest monthly gain since May, and hit a two-month high of $0.8474 on Thursday, August 29.
The New Zealand dollar also rose 2.35% against the Japanese yen, hitting a four-week high of 91.42 yen on Friday, August 30. It also added 1.65% against the Swiss franc, its biggest monthly gain since May, and hit a four-week high of 0.5321 francs on Friday, August 30. The New Zealand dollar rose 1.6% against the Australian dollar, its biggest monthly gain since November 2022. It hit a two-month high of $1.0798 on Thursday, August 29.
JPMorgan noted that the Reserve Bank of New Zealand’s decision to move early on interest rate cuts provided additional support to the New Zealand currency. With expectations of better economic results in New Zealand, pressure on higher interest rates is eased, boosting the value of the New Zealand dollar.
Early decision by the Reserve Bank of New Zealand
JPMorgan analyst Ben K. Jarman said markets were already expecting a significant amount of easing. But now that the process has started, and slightly earlier than expected, there is now greater comfort that the New Zealand economy will stabilise through 2025. This potential stabilisation allows the risks associated with a slowing economy to be somewhat mitigated. Jarman added that current rates are not as burdensome as might be assumed.
RBNZ has not quite matched the degree of implied easing that was expected in the final interest rate market. With the August 2024 foreign exchange market trading ending on August 30, the New Zealand currency has performed remarkably, outperforming most major and minor currencies. The New Zealand dollar posted its biggest monthly gain since November 2023, rising 5.4% against the US dollar to a seven-month high of 62.99 cents.
Performance Analysis Against Major Currencies: New Zealand dollar rose 2.95% against the euro, posting its biggest monthly gain since September 2023, and hit a seven-week high of $1.7651 on Thursday, August 29. It also rose 2.9% against the British pound, posting its biggest monthly gain since August 2023, and hit a seven-week high of $2.0981 on Thursday, August 29. In addition, the New Zealand dollar rose 2.65% against the Canadian dollar, posting its biggest monthly gain since May, and hit a two-month high of $0.8474 on Thursday, August 29.
It rose 2.35% against the Japanese yen, and hit a four-week high of 91.42 yen on Friday, August 30. It also rose 1.65% against the Swiss franc, posting its biggest monthly gain since May, and on Friday, August 30, hit a four-week high of 0.5321 francs. Finally, it rose 1.6% against the Australian dollar, posting its biggest monthly gain since November 2022, and on Thursday, August 29, hit a two-month high of $1.0798.
RBNZ’s Early Decision
JPMorgan reported that the Reserve Bank of New Zealand’s decision to cut interest rates early has provided some support to the New Zealand currency. With the prospects of better economic outcomes in New Zealand emerging, pressure on higher interest rates is being eased. According to Ben K. Jarman, an analyst at JPMorgan, markets were expecting a lot of easing.
With the process starting, and a little earlier than expected, investors are feeling more comfortable about the stability of the New Zealand economy until 2025. This potential stability reduces the scope for required interest rate cuts. Investing in New Zealand Dollar as an Attractive Opportunity: Investors are focusing on the New Zealand dollar as one of the best investment opportunities available in the foreign exchange market, due to the commitment of the Reserve Bank of New Zealand to high interest rates that are second only to the Federal Reserve’s interest rates among the eight major currencies. With the Federal Reserve approaching a US interest rate cut in September, New Zealand interest rates are expected to top the list of interest rates for major and minor currencies.
New Zealand Business Confidence: A survey conducted by ANZ Bank showed that business confidence in New Zealand rose to a ten-year high in August, with indicators of forward-looking activity increasing strongly. A key measure of the business confidence survey showed that 50.6% of respondents expect the New Zealand economy to improve over next year, compared to 27.1% in the previous survey in July. Sharon Zollner, chief economist at ANZ Bank, said that things are improving, even if they are still in a difficult situation for many companies. Reserve Bank of New Zealand Expectations: The chances of the Reserve Bank of New Zealand cutting interest rates by 25 basis points at its upcoming October 9 meeting.
