The first reason why the New Zealand dollar is so strong is that New Zealand’s GDP is rising faster than almost anywhere else in the developed world.
To be specific, New Zealand’s GDP expanded +1.1% between July and September 2016, almost double the UK’s +0.6%, and well beyond the Eurozone’s +0.4%. New Zealand’s GDP is rising, in large part because New Zealand’s population is expanding remarkably quickly. New Zealand’s population jumped +2.3% in Q3, 3 times the rate of the USA.
This rapid GDP growth makes investing in New Zealand very attractive, lifting the kiwi dollar.
The second reason why the New Zealand dollar is so strong is that interest rates in New Zealand stand at +1.75% at present, higher than almost anywhere else in the developed world.
This has strengthened the New Zealand dollar, because the higher interest rates are, the more profitable it is to invest in your country, thereby lifting demand for your currency. What’s more, given that New Zealand’s economy is growing so quickly, the Reserve Bank of New Zealand looks unlikely to cut interest rates in the future.
Hence, this should ensure that the New Zealand dollar stays strong!
The third reason why the New Zealand dollar is so strong is because New Zealand is far more stable politically than most countries right now.
To be specific, former kiwi finance minister Bill English took over from ex-prime minister John Key with a minimum of fuss. This has lifted the kiwi dollar, because if your country is politically stable, it’s less risky for businesses to invest there. By comparison, Australia has had 4 prime ministers in the last few years, the UK has just voted for Brexit, and Donald Trump is about to become US President.
Hence, the New Zealand dollar looks the most stable.
With all this in mind, the New Zealand dollar is very strong in 2017, and looks set to stay strong for the foreseeable future!
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