Technical Terms

New Zealand dollar, ISO 4217 currency code being NZD and numeric code being 554, serves as the national currency of New Zealand, the Cook Islands, Niue, Tokelau and Pitcairn islands. The currency has its own due importance and place in the group of major dollar-dominated currencies of the world. Often termed as "kiwi", the New Zealand dollar got incepted in the year 1967 replacing the New Zealand pound. It is officially depicted with the symbol "$" or "NZ$", the latter symbol used to distinguish the currency from other dollar currencies. "Cent", like in every dollar currency, acts as the subunit of New Zealand dollar.

Overview

The New Zealand dollar stands among the top ten most traded currencies of the world. Also known as kiwi (the name is derived from the name of new Zealand’s national bird printed on $1 coin), this currency rightly finds an important place amongst the various dollar-dominated currencies. The New Zealand dollar stays strong in the world financial market and that is why it attracts the attention of the potential investor. The importance of the currency can be determined from the fact that some of the independent economies around the country have dollarized their currency systems including Cook Islands that also issues its own currency

• Cook islands

• Niui

• Tokelau

• Pitcairn islands

The currency of New Zealand is also having some interesting facts about it. The banknotes of the currency that bears prominent ":Maori" work also have the name of the images on the bank notes written in Maori and all the names start from consonants. The $50 note is the only note in the series that features Maori work on the obverse side of the note. The images of important historical personalities on the banknotes also include two personalities on $5 and $20 notes that are still alive, other all being dead. The $20 note bears an image of Queen Elizabeth II, the only personality that is not the citizen of the country.

The country has an economy, which is rebounding in nature, and the economy has to be checked concerning the inflationary pressures. The New Zealand dollar plays a crucial role in achieving that objective. The import and export of the currency is free but a declaration has to be made when the amount exceeding $10000.

New Zealand’s current currency i.e. the New Zealand dollar or the Kiwi came into existence in 1967 replacing the New Zealand pound and adopted decimalization concept currency. During the mid 19th century, the British currency prevailed in the colony and pound, shillings and pence were accepted as the legal tender. During that time, the shortage of coinage in the United Kingdom affected its colony and some efforts were also made by a few retail traders to issue their own tokens in place of pence. But the practice was banned in 1881.

New Zealand introduced its first currency 1933, their first currency being New Zealand pound that looked very similar to the British pound at that time and was based upon the fractional subdivision system. With the introduction of the new currency, the Reserve Bank of New Zealand was also established in 1934. The reason for the switch over to the new currency was the shortage and smuggling of currency coins. This important step made New Zealand last and the farthest of the self-governing colony of the British Commonwealth. In 1947, the use of cupro-nickel dollar coins replaced the silver coins in the economy due to the increasing costs of mining silver and minting it. In 1959, a committee was formed to report overt the feasibility of decimal currency in the country and this committee stood in favor of a decimal currency. Consequently, in 1964 the decimal currency act was passed giving way to a new currency for the country i.e. New Zealand dollar.

The banknotes of the new currency were issued in 1967 itself by the reserve bank with denominations $1, $2, $5, $10, $20, $50 and $100. The change in the printer of the banknotes resulted in the second issue of the bank notes in 1981 with a few changes in the previous series. In 1990, the decision to completely change the look of the banknotes was taken and a new series was issued with advance security features. Now in 1999, a whole new series of polymer banknotes was issued. When the currency was initially adopted it was pegged to the US dollar till 1971. But then the pegged was changed to a basket of currencies and this peg continued till 1985. From 1985 onwards, the financial markets of the world determine the value of the New Zealand dollar.

The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

• Flow of imports and exports between the countries
• Flow of capital between the countries
• Relative inflation rates
• Fluctuation limits on exchange rate imposed by the governments of the countries
• Merchandise trade balance
• Rate of inflation in the country
• Flow of funds between the countries for the payment of stock and bond purchases
• Relative growth
• Short term and long term interest rate differentials
• Cost of borrowings