Global investment bank giant JPMorgan is warning its clients that in a recession, the NZ dollar will be the worst performing major currency

Global investment bank giant JPMorgan is warning its clients that in a recession, the NZ dollar will be the worst performing major currency

One of the world’s top investment banks has warned its clients that the kiwi dollar is “by far” the worst performing major currency in a recession.

In an investment note, JPMorgan Vice President of Global Currency Paul Meggyesi says the New Zealand dollar loses, on average, 7% to 8% of its value in a recession.

According to Bloomberg, Meggyesi’s research comes from currency analysis across the last five recessions.

“Recessions are when creditors get to ask for their money back,” he says.

The research comes after a tit-for-tat trade war between China and the US sparked fresh concerns about a looming global economic slowdown.

Although Meggyesi says that talk is “premature,” he says it is a “sensible” time to review contingency plans amid the likelihood of a further escalation in trade tensions.

He adds that the best currencies to own during a recession are the Swiss franc, Japanese yen and the Singaporean and US dollars.

Westpac Head of New Zealand Strategy Imre Speizer broadly agrees with Meggyesi’s assessment.

He says the kiwi dollar is one of the most sensitive currencies in the G10 – the 10 most heavily traded currencies in the world.

“When risk sentiment is strong, the kiwi goes up and when it’s down, the kiwi goes down.”

In times of recession, risk appetite is low and investors aren’t as bullish about the kiwi dollar; therefore the kiwi tends to drop quite strongly.

He says it’s the same with the Aussie dollar.

But when the global economy is performing well, the Aussie and kiwi currencies tend to perform well too.

“The reason why the money goes into Aussie and Kiwi when times are good is partly because both economies are very outward looking, very internationally exposed.

“When the world is performing well those two economies would be expected to perform well and the currencies reflect that.”

Speizer agrees that the Swiss franc, Japanese yen and the Singaporean and U.S. dollars would gain in value during a recession.

“Think of a spectrum of currencies, the Aussie and Kiwi would be at the extreme right end if that’s the riskiest.

“And on the extreme left you would have the yen and the Swiss franc.”

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This is another reason why overseas based owners of ghost houses will reconsider their options.

By re-consider, do you mean purchase more?

Say NZ$ drops 50%. That means for the locals, house prices stay the same.

But for overseas investors the prices have just halved.

They will snap them up, and in all likelihood we will see the local $ price increase again. In theory it could double, before the overseas guys are even paying the current market price.

Noncents, can you guarantee current owners would be comfortable with the prospects of such a haircut? Post GFC2, there is unlikely to be another white Knight for NZ and Australian Real Estate as Chinese citizens will be reeling under the price of their repeated can kicking.

I am not saying its good for locals, quite the opposite. We are screwed.

Best thing to do now, would be to sell your house. Bank the money offshore. Then come back and rebuy your house for half the money in 12 months time.

Problem is, it's not something that is easily manageable for the average Kiwi.

Noncents, good point. Any mass realization of assets by locals in sync with overseas domiciled investors and shifting of funds offshore is a distinct possibility. This would just deepen and prolong the slump. Of course there's always going to be bottom feeders. In such times, there would certainly need to be a lot of them to sustain a confidence based recovery by historic comparison. Considering we are looking down the barrel of job losses at the hands of technology combined with the possibility of job losses connected to any real estate bust, any quick employment driven recovery looks dicey at best. In such times it's easy to visualize a lot of young adults heading back to their parents much like what has happened overseas post GFC. FHB's to quickly come to the rescue? Can't see it.

Exactly, I can see why confidence is low. We have all the signs of a good ol' fashioned "Closing down sale"

The main issue in a recession for buyers is the availability of Bank funding at a time Banks will not lend to each other much as is starting now.

Sure, that's assuming you can perfectly time a recession and even more challenging...currency movements? Doubtful.

Say NZ$ drops 50%. That means for the locals, house prices stay the same.

One glaring issue with your assertion:
Yields aren't paid nominally in the swap currency. Thus, there is no short to medium term arbitrage.

Cashflow is king in a recessionary environment.

Why on earth would an overseas investor wish to buy into our over heated housing bubble? Only a fool would do so.

Agree, but we're planning on taking that pot of gold away.

So if it were only foreigners viewing NZ as cheap and they know that they are no longer going to be replaced by other foreigners in the Ponzi, what do you do? Wait for the kiwis to be able to afford things again (many many years down the line), get out and take your gains, (market floods with stock), walk away from your loan, hell those Aussie banks were silly enough to lend the money but what if investors do 'walk away' and return home? Do we have laws in place to chase bad debts in China, India etc etc? Remembering that in some countries access to credit is a relatively knew phenomenon... Moral hazard? I should say there is a risk at present.

Where will the dollar be in 12 months? Your suggestion of sell now, exchange currency and return later looks like a very sensible suggestion.

I forgot to say, 'Thanks Sir John.'

"will be the worst performing currency"

hmm.. wonder if that is due to the fact that this economy is build on houses....

Yes - but houses, and the land they sit on, are the one consumer good that never goes out of fashion.

ah, you def. dont understand recessions/bubbles...

I understand perfectly. A recession and a bubble are two very different things.

Do you understand that price, store of wealth, and investment are not the only drivers behind housing.

A roof over your head is one of the fundamentals for surviving. Will that change? No.
Can you buy land/house in China? No
Does NZ have relatively low population density? Yes
Can NZ feed/house/cater to millions more people? Yes (Do we want too? No, but that is another argument)
Is NZ Relatively Safe? Yes
Politically, is NZ relatively free and stable? Yes
Are property prices high? No, not by Global standards. They are only high relative to our Domestic Income.
Are foreign buyers allowed free access to the NZ housing market? Yes.

The fundamentals are all strong - i.e. the intrinsic value exists. So I don't see how the current market can be considered a bubble. No, it is not affordable for locals, yes this is bad. But it is not a bubble.

Again - Yes, we are likely to have a domestic recession. Yes it could be very bad. But
I would rather be in a recession in NZ, than a recession in China, India, Brazil, South Africa, etc...

So if you have some money, and are living in a not so nice part of the world. What would you do?

rather than me wasting time replying..

as per patrick..

A propped up economy over the last decade from foreign money infusion at unprecedented levels inflating asset prices beyond normality of average KIWI income. In other words people will begin to feel much poorer in the coming years.

That's right.

Now, keep applying that logic. Housing gets relatively cheaper to overseas buyers, so why would they stop buying now?

Or we could take the "official" route, and state with absolute certainty that Foreign buyers are having minimal impact on the NZ housing market.

In which case everything I have written is indeed wrong, as all demand is fueled entirely by locals. So when we have a recession, house prices will collapse completely, leaving the whole country in ruins.

At which point Mr and Mrs overseas buyer will rock up and buy the country for the equivalent of a musket and a moldy blanket - and the bad thing is, we will be so desperate we will gladly take it, and throw in the car as well.


1. It's not necessarily about the monetary investment/return. See my post above.
2. Say it is a monetary thing, buy low, sell high. Why wouldn't you invest if a mere swing in currency could see you sell for the same domestic price, but bring in twice as much foreign currency in 6/12/18 months time,


Yes, there is always an element of financial risk.

Disclaimer: I know this is a financial site, but I do like to try and present a non-financial viewpoint at times - after all occasionally they can be useful. So here it goes...

It's not always about the money!

Maybe the physical risk of being "rich" in a developing nation prone to violent uprising, purging, kidnapping, assault, theft .... means that you/your families personal safety outweighs the financial risk of moving.

After-all look at the mass immigration trying to get into the western world right now. How many are giving up literally everything (including their lives) to do it.

Sometimes the best money you can spend is keeping you, and your family safe and healthy.


Hence why we need to have restrictions on unnecessary migration and stop non-citizen buyers from purchasing property.

Couldn't agree more.

If only we had voted for someone who campaigned on that oh wait...

Also rents may decline to match falling prices and rising interest rates, but costs are sticky. I remember my Grandmother telling me that her uncle inherited a house on Khyber Pass Rd during the great depression but he had to sell it because he could't afford the upkeep.


Is NZ Relatively Safe? Yes

Huh? NZ is practically Johannesburg compared to China, where women think nothing of walking home at night alone or leaving their electronics lying around while they use the bathroom. A notion chinese students are quickly disabused of as they wander around with laptops and wallets full of cash in the area around Auckland uni their first semester... where many are robbed.

I stand by my point:

In NZ - They walk around and they "may" get robbed.

in Jo'burg - They walk around, and it "may" be that being robbed is the best case scenario.

in China - The baby girls "may" be allowed to be born and then if they aren't Muslim, Christian, Tibetan, Foreign, etc... and if they and their friends and families tow the party line, then yes, they "may" grow up to be able to walk around with a laptop and some cash without being robbed.

I know where I want my daughter to grow up.

A propped up economy over the last decade from foreign money infusion at unprecedented levels inflating asset prices beyond normality of average KIWI income. Drop the inflated NZD to historical values and bring back normality to an export dependent nation. One that grows on good and services produced in NZ as opposed to the cocaine of foreign currencies taking everyone on a unsustainable euphoric high. In other words people will begin to feel much poorer in the coming years.

Let’s be clear Auckland property prices didn’t decline as much as America’s in the GFC and to be sure American homes declined in value a lot further than 7 or 8%
NZ is a safe haven country regardless of what JPMorgan says about the NZ$ in a global recession
They should be advising their clients about Deflation which will hurt their clients worse than any 7 or 8% drop
in their Kiwi dollar holdings

I tend to agree with you Northern Lights. The KIwi is now perceived slightly differently to the way it has been previously. Switzerland of the south we aren’t-too small an economy but which major currency would you really like hold in the next downturn? They all have their foibles.

Investors now differentiate more between Aus and NZ economies. NZ is becoming more of a safe haven economy in an ever stranger world.

The NZ currency is backed by a housing debt ponzi.

NorthernLights, I don't get your point. Of course Auckland property prices didn't decline as much as America's in the GFC, it was substantially the American housing market that caused the GFC in the first place (as well as the complicated financial instruments that were attached to it). Not to mention the various reasons that NZ was shielded from some of the ravages of the GFC compared to elsewhere anyway.
JPMorgan is not commenting on the cause of the recession but at this stage, it's highly unlikely that the next recession is going to be triggered by the American housing market. And it's substantially more likely that the next global recession will see hurt in China and Australia. So not only will NZ not be shieldedin that instance, they will be substantially more impacted than elsewhere (unlike the last global recession). Are you suggesting that NZ will be a deflation safe haven? Or some other kind of safe haven?

Northern Lights - Is a double whammy drop what you mean?... reduced NZ property prices compounded by a reduced NZ dollar when converted back into the currency of origin..... Is that not deflation? I guess that is what they are advising then....

People might also consider buying gold. Even with gold's recent decline in value it's up 9.21% (year-to-date) against the NZD - now that's preserving wealth!

Indeed. Will the laundered money in NZ houses be happy to drop back to long term kiwi levels or will it want to sell up and move elsewhere?

Overseas owner who pays stuff all tax in NZ ban will be even more important in a decline.

This article refers to a"spectrum of currencies" and just wondering if there is a link to an article or chart with all of the currencies in that spectrum. The article mentions the currencies at the two extreme ends... the ones that do the best and worst in a recession... but what about all the others? Any chance of that info or a link to where it might be found?


Since 2104 NZD lost 22% against the USD, add another 8% and you are down 30% oops...
Jul 2014 0.88c - 10 July 18 0.68c

Thanks moneyphobe. I read that too but it doesn't flesh out any more info than the article above. It doesn't mention how the other currencies in the spectrum behave in a recession.

There is little doubt that NZD is at risk of a rough ride but how about all the other currencies?

Lets just remember that we do need a recession every now and again .

Boom conditions lead to massive distortions in the allocation of resources , and disproportionate risk taking (housing speculation being one ) in the belief the good times will never end .

And good things never last forever........... just take a moment to think about it .

We have had a spectacular run , frankly we have never been as wealthy on paper as we are right now .

It cannot last forever , but understanding the dynamics of an economy ( not even from a textbook point of view ) will enable people to understand that the machine needs to reset every now and again

We're already down 10% over the past 10-12 months to the USD. Struth, I can remember 29UK pence to the dollar. Suck it up guys & gals. Keep breathing and it'll be okay at the end. The good guys win remember.

And its gone from 57p in July 2017 to 51p (ish) today (NZ$ to GB£) and the UK (given all the Brexit uncertainty) is a basket case of a currency until they decide whether they're in/out, in/out or just going to continue shaking it all about.... So not sure what that says about NZ dollar.....

Thankfully the Reserve bank have a confidentiality agreement in place with our Australian banks so whatever findings about the real state of our debt position (household mostly) hasn't yet been revealed to the international market-place.... The NZ dollar is after all just a play thing for currency gambling amongst the G10 currencies (G stands for Gambling). When you take a look at all the other G10 currencies that are heavily traded you will see that most of them have significantly bigger and dare I say, slightly more diverse economies that NZ... we are actually tiny and I think someone mentions Switzerland within these comments but no we don't have a banking sector, (even Goldman Sachs only keep 2 graduate trainees, (over from US on secondment because they like rugby, and a a cleaner present in their Auckland office)

JP Morgan really are buggers though exposing us to everyone... I wonder who put them up to it - will the 'ma and pa' carry traders lose faith in us? Because our rates aren't going up on deposit funds for some time. There's probably a few weeks before they all hear about it though if anyone is carrying a position and day trading could be fun, just don't get caught holding the burning branch.

For your viewing pleasure;

Theresa May stars in Monty Python's Search for the Holy Grail

(the UK may be a basket case of a nation but at least they haven't lost their sense of humour about it).

Ninja Of Ginger.. That is superb and thank you. 'It's only a flesh-wound' this Brexit thing!

So where can I stash my hard earned money , so that could I can use it to buy a home and settle in NZ or Ais , say in 10 yearstime?Can NZ/Aus banks hold money in USD ??

Of course NZ and Oz bank accounts let you hold foreign currency, I have USD, EU and GBP currency accounts. You can also get TD's in NZ in foreign currencies.

Though if you hold directly in AUS you are covered by the govt guarantee. Not so in NZ.

Referee JPMorgan holds up the yellow card!.. the dollar is loudly protesting... but is off to the bin for 10...its going to be a tough game now for this NZ side... video ref clearly sees the economy in trouble with housing, dairy both going to their knees and population growth obviously offside....dollar looks like the fall guy here... luckily the coaching staff have taken their tax free gains and are fab wealthy... Enjoy the game.

Dear JP Morgan, the NZD is NOT considered a "major currency anywhere in the world"

Says who

Sorry HO, I should have signed it so you know.


The reason I ask is due to the fact that the nzd is in the top 10 most traded currencies, isn't that major enough

Being #11 the NZD is actually very minor indeed. Only three or four currencies mean anything - the USD dominates, the EUR has reasonable volume, as does the JPY and GBP. But after that, the rest are very minor. Even the CNY is tiny and actually trade done in the Chinese currency is  falling. It's now less than 2%.

In the SWIFT tracker series, the NZD is #18, with only a 0.3% share.


It is an interesting curiousity that Forex trade in NZD is greater than CNY. Presumably China isn't quite at reserve currency status just yet, then, despite their ambition in that regard.

Put it this way, I've been in travelling through various countries in Europe for the last 4 weeks, I've used my credit card about 100 times, every time it gives me the option to pay in the local currency or in NZD, I always ask the sales person "do you know what NZD is?" Zero, nil, niemand, personne, nadie, not 1 person know what an NZD is

NZD is only a major currencies to currency traders. The world is a weird place.

The Swiss franc (CHF) is only the best currency to own in a recession, upturn or flat market ; )

And sometimes, even "safe haven" currencies cease to be considered so. GBP was considered a safe haven for decades and now, nah, not so much.

Although, it will be very interesting to see what happens over the next year for GBP, especially GBP/NZD.

Personally I think the GBP is inversely tied to the Euro. When the Euro collapses GBP will quickly regain all its credibility.

Disclosure of (self)interest, I am currently in Switzerland

Simple fix. Just kick this Government out then everything will appreciate!

GFC was the biggest crises in recent times and housing was down just 5-7%.
Point is recession comes and goes - banks should know better to be alarming

what is alarming however is the profits they continue to make even in a recession.

NZ was shielded from the worst ravages of the GFC (as were China and Australia). Different cycles have different features. This last cycle (since the GFC) is completely unprecedented... so shallow analysis and comparisons to the GFC simply can't be served up on a platter. I don't claim to know what the other side of this cycle will be like, but it's highly likely that NZ won't have its Australia and China shield this time, or worse still that NZ and Australia will have their own domestic financial crisis, without even counting the issues in the global economy (which may or may not also impact NZ). China is unlikely to fare the next recession as well either.

No one is analysing here. I deal with facts.
yours on the other hand is crystal ball stuff