The NZD/USD Currency Pair (New Zealand Dollar / U.S. Dollar) is the exchange rate of the New Zealand dollar expressed in U.S. dollars. It expresses the value of one New Zealand Dollar in US Dollar. Forex professionals also nicknamed the Kiwi.
The NZD/USD represents about 1% of total transactions on the FOREX in 2010. The pair NZD/USD is deemed to be related to changes in gold prices. Indeed, New Zealand is the 3rd largest gold producer in the world and as such, when gold prices declines, the New Zeland dollar declines as well. It is found a positive correlation of 84% with gold between 1998 and 2008.
The pair NZD/USD was also positively correlated almost perfectly with the AUD / USD (96% between 1998 and 2008). This can be explained by the fact that Australia is a preferred business partner because of its proximity. If Australia is economically healthy, exports from New Zealand will increase and this will have a beneficial effect on economic growth.
The pair NZD/USD is quoted in 4 decimal places but you can sometimes find 5 with some brokers. The exchange rate is floating and therefore subject to the law of supply and demand on the interbank forex market.
The health of New Zealand’s economy is closely tied to the health of the Australian economy. This explains why the New Zealand dollar and the Australian dollar have had a 92% positive correlation over the past four years (2003-2006). The New Zealand dollar has an even stronger correlation with gold than the AUD/USD does – the correlation has been approximately 88% over the past three years. If you believe the price of gold will continue to increase, you could favor a commodity-based economy like New Zealand because if gold rises, the New Zealand dollar is overly likely to follow it’s lead.