The New Zealand dollar closed in New York on Friday at its lowest level against the Australian dollar in more than ten years.
It closed trading at NZ$1.00 = AU$0.7381
It was last at this level on October 5, 1990.
Its record post-float low was AU$0.603 on March 5, 1985, at the very beginning of floating freely. Its record post-float high was AU$0.9554 on December 6, 2005.
We have a healthy trade surplus with Australia.
In 2010, New Zealand sourced 18.2% of its imports from Australia worth NZ$ 7.7 billion, and Australia was the destination for NZ$ 10.0 billion or 23.0% of its exports.
This record exchange rate between the countries is due more to the surging value of the Australian currency on world markets. The AU$1.00 now buys US1.017, close to its record high. It was the currency with the largest gains on Friday in international markets, on the back of good data out in the US, and improving sentiment about prospects for the US economy.
Need to convert NZ$ to another currency? Use our special page to get the very latest rates offered by the banks, and our tool to work out the lowest cost including fees.
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4 Comments
You shouldnt be too surprised. No prizes for guessing who the 4 biggest overnight traders are. They're selling NZD and buying AUD. When bank customers deposit money in a bank account, the banks have what is known as a "float" at the end of each day. That float is used by the banks to trade the currency markets overnight. Any proceeds are not passed back to the customer. It goes into the banks coffers.
I am not sure of your understanding of the Banking system but each Bank has a settlement account at the RBNZ and its aim is to have this as close to Zero at the end of each days after all of its transactions are processed with all other banks etc.
In effect if it is in credit then its paid the ORC rate for overnight cash balances. It by mis calulation its settlement account it is overdrawn then its charged interest by the RBNZ in excess of the OCR.
This is where the impact of the ORC is as it sets what the RBNZ will pay or charge Banks on its overnight position.
Banks don't want to have too much of its funds in its RBNZ settlement account as it can earn more by lending it out to clients (or other Banks thus term Bank Bill) and on the other side it doesn't want to overdraw its RBNZ settlement account as this is more expensive than get funds in from depositors.
Yes Banks do do FX transactions as well as Billions of other transactions each day, both domestically and Internationally, most of these being on behalf of its clients.
Managing the Banks position is no easy task, its needs to know what loans may be being drawn down on any one day, what term deposits are maturing and may be lost, etc as well as the impact of FX transactions which will impact on Banks position as well.
I'm not sure any float has much to do with currency trading. The float and the OCR, sure; that's what it is - the transfer rate of the domestic NZ$ imbalances in the 'float' between banks though their accounts with the RBNZ. But currency pairs are generally traded for spot delivery. That's two business days hence. Any same-day delivery is worked back through the short date swaps price to, in effect, move it into a spot settlement situation.
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