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NZD News: Kiwi dollar boosted by positive trade war news

13th December 2019

Happy Friday, fellow travellers and foreign currency enthusiasts. I'm currently writing this on a plane to New York where I plan on visiting Wall Street and taking a picture with the famous charging bull! I know what you're thinking - how will I sleep tonight? My excitement levels are way too high. 

If you're like me and are currently travelling, or planning on jetting off soon, you'll be stoked to hear that the Kiwi dollar has appreciated against several G10 currencies include the US Dollar (I'm spending my extra travel money on at least five slices of pizza and maybe some New York cheesecake, how about you?). With this in mind, one Kiwi dollar will currently buy you:

0.6466 US dollars
69.623 Japanese yen
0.5724 euros
0.486 Great British pound
18.8685 Thai Baht
0.9325 Australian dollars
13,775.4 Vietnamese Dong

Did you already buy your foreign currency and miss out on today's improved rate? Or perhaps you're unsure when to buy in case the NZD sees another improvement? No stress, just add Rate Move Guarantee to your purchase at any Travel Money NZ store. It's free, and if the rate improves within 14 days, we will refund the difference*. 

So why has the Kiwi dollar appreciated? 

A few reasons, however, the most significant factors would be improved global market sentiment and some seemingly solid trade war news. Polls have also just closed for the UK general election; however, we won't know the final result for a while yet. I've got time to kill on this flight, and the lack of wifi means I can't scroll through pictures of New York food inspo, so we may as well dive a bit deeper into these elements. 

Trade War News

US President Trump tweeted that the US and China are very close to signing a 'big trade deal'. This 'uge trade deal has supposedly been reached and written and is just waiting for Trump's signoff. It is expected to be part of the 'phase one' trade deal as opposed to the larger trade agreement. 

While markets are unsure of what the deal will include, many expect it will involve the USA abandoning Sunday's scheduled tariff increase on Chinese imports and addition to rolling back tariffs already in place. 

Should Trump sign off on the deal, it is an excellent step in the right direction, and a relief to the Kiwi dollar, which has recently been weighed down by uncertainty surrounding the conflict. China is one of our biggest trading partners, and the weight of increased tariffs on the Chinese economy was filtering through to New Zealand. This news has encouraged not only appreciation in the NZD, but also the Chinese Yuan and Australian dollar. 

Fingers crossed the deal is signed off in the next few days so that we can all take a sigh of relief and enjoy a few weeks without any trade war news before they resume further trade and technology discussions in 2020. 

Improved global market sentiment

Positive trade war news has added to a positive economic outlook that was alluded to by the Federal Open Market Committee (FOMC), a committee within the Federal Reserve System (the Fed). Yesterday the FOMC indicated they were more confident about the state of the US economy and removed a previous reference to "uncertainties" in the market. 

The European Central Bank (ECB) mirrored this tone when they kept interest rates on hold and maintained their stance on the state of the economy. 

This positive global outlook has boosted market confidence and helped put upward pressure on the value of the Kiwi dollar. 

Over the past two weeks, the Kiwi dollar has seen significant upward pressure as a result of the factors mentioned above, and a positive domestic outlook. The NZD was further boosted by the Government's announcement to spend an extra $12bn on infrastructure between 2021 and 2024. This is in addition to another $2bn towards the Government's bond programme. Why is this such good news? Well, market estimates suggest the spending is equivalent to 0.5% to 0.7% of Gross Domestic Product each year. Growing GDP helps boost economic growth which is good for both the Kiwi economy and the NZD. 

UK General election 

Today UK citizens hit the polls in what has been dubbed one of the most critical elections of the decade due to Brexit. After a few weeks of the Conservatives having a clear majority in polls, a poll released at the start of the week showed a majority of 28 seats is most likely. It's also worth noting that this particular poll has a margin for error of +/- 28 seats. Lol. 

Anyway, after a tumultuous day of voting, the exit poll released when polls closed earlier this morning suggest Boris Johnson’s Conservative party is set to win a clear majority. Of the 650 seats available, a total of 326 is required to form a majority. The exit poll suggests Boris' party will snag 368, which is more than enough to claim a substantial majority. 

Should this be the case, the GBP is expected to see some upward pressure as it is almost certain Boris will 'get Brexit done' by January 31 2020. His new government majority would allow proceedings to run quite smoothly to get all of the relevant deals and legislation passed with far less tension then we have seen in the past. 

If the poll is wrong and Johnson doesn't secure a majority, well who knows what will happen. Only time will tell as votes are counted. 

Just imagine if Boris got in, and Brexit was pretty much settled, AND the trade war was signed all in the same week – the week that I am in New York!! Alicia Keys was right; this city is the concrete jungle that dreams are made of. 

If you're travelling soon, especially to the UK, it's worth keeping an eye on the results of the election and developments in the trade war. They are likely to have the most significant effect on the value of the Kiwi dollar and the amount of travel money you'll be taking on your holiday. 

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