The British Pound to New Zealand Dollar exchange rate (GBP/NZD) had been declining earlier this week as investor sentiment wanes amid global political pressures.
The Pound Sterling (GBP) was forecast to face volatility against the Euro (EUR), Aus Dollar (AUD) and NZ Dollar (NZD) over the remainder of the week as the UK determines their involvement in the Iraq and Syria crisis.
The ‘Kiwi’ strengthened against other majors such as the US Dollar (USD). Currency expert Masato Yanagiya stated: ‘The entire market is undergoing a retracement - from currencies to stocks and Treasuries.’
The latest forex conversion rates as of today show the latest forex losses (updated 25/09/2014):
- The New Zealand Dollar to Australian Dollar exchange rate is trading down -0.88% at 0.90193 NZD/AUD.
- The New Zealand Dollar to Canadian Dollar exchange rate is trading down -1.15% at 0.88264 NZD/CAD.
- The New Zealand Dollar to Swiss Franc exchange rate is trading down -1.16% at 0.75370 NZD/CHF.
- The New Zealand Dollar to Chinese Yuan exchange rate is trading down -1.57% at 4.86882 NZD/CNY.
- The New Zealand Dollar to Euro exchange rate is trading down -1.06% at 0.62417 NZD/EUR.
- The New Zealand Dollar to Pound Sterling exchange rate is trading down -1.3% at 0.48735 NZD/GBP.
- The New Zealand Dollar to Hong Kong Dollar exchange rate is trading down -1.54% at 6.15245 NZD/HKD.
- The New Zealand Dollar to US Dollar exchange rate is trading down -1.56% at 0.79349 NZD/USD.
Note: these are inter-bank forex rates to which margins are applied when transferring money to and from New Zealand and the UK - speak to a recommended FX provider to lock in the best foreign exchange rates. Also get free email updates or rate alerts.
New Zealand Dollar Rate Precarious amid Dairy Cuts
The New Zealand Dollar was trading tentatively ahead of dairy giant Fronterra’s Wednesday announcement which discussed milk payouts. As dairy is New Zealand’s largest commodity, Fronterra’s decision to cut its milk payout to farmers in the country is likely to cause a softening of the ‘Kiwi’. Dairy prices have tumbled in 2014 as Chinese demand decreased. China is New Zealand’s largest trading partner, and consequently Fronterra’s most significant customer.
Fronterra has signalled the pay cut will see farmers receiving only $5.30 New Zealand Dollar’s in exchange for a kilogram of milk solids, lower than the previous $6. Wednesday’s news causes major disappointment for farmers who were given $8.40 NZD last season per kg. Fronterra Shareholders Council Chairman Ian Brown commented: ‘This announcement will put real pressure on some farmers’ cash flows. [And] will add to the challenges being faced on-farm.’
One aspect supporting the New Zealand Dollar, however, is a smaller than expected trade deficit. The ‘Kiwi’ balance shrank to $472 million NZD, down from July’s revised $724 million and leaving the deficit at a four-year low. Moreover, exports also rose to a higher than expected level at $3.52 billion NZD despite forecasts to only attain $3.20 billion. Statistics expert Jason Attewell commented: ‘Cattle, milk fat, and cheese contributed to the rise in exports. It is the first time in three years that a rise in dairy was not led by milk powder.’
British Pound Rate Faces Geopolitical Pressures
The Pound has seen losses on Wednesday as the conflict between Syria and Iraq intensifies and other nations are drawn into the uncertainty. As tensions have escalated in recent weeks, the UK parliament now potentially faces a vote to discuss undertaking action in the countries. UK Prime Minister David Cameron has stated that Islamist terrorists want to ‘kill and maim’ people of the UK and continued to hint that Britain’s involvement should be influential.
Mr Cameron addressed an American audience, continuing: ‘There are other plots they [ISIL] have been attempting including in my own country—in order to kill and maim innocent people. And the same applies to the United States of America. So this is a fight you cannot opt out of.’ It is expected that the UK Parliament will be recalled on Friday to vote on potential action. Sterling may remain volatile for some time until decisions are made, causing investors to seek safe haven currencies such as the Japanese Yen (JPY).
New Zealand isn’t expected to release any further data this week, leaving any alterations in the GBP to NZD exchange rate dependent on Pound movement and global developments. If the UK becomes more involved with the Syria conflict, it can be expected that Sterling will experience volatility as investor risk aversion kicks in.