NZD/USD is a symbol that's known to those in finance and investing as a currency pair. This particular currency pair pits the New Zealand dollar against the United States dollar. Currency pairs are a comparison toll used for trading in the forex and binary options market. These pairs are designed to ask the question, “how many units of the second currency can someone purchase using only a single unit of the first currency in the pair?” For binary options traders, the goal here is to determine which currency will rise in value faster than the other. If the trader believes that the New Zealand dollar will rise in value faster than the United States dollar, he would purchase call options. However, if the trader believes that the United States dollar will rise in value faster than the New Zealand dollar, he would purchase put options.
Historic NZD/USD Price Movements
Going back to 2005, the currency pair was off to a relative sideways start. However, in 2006, the United States economy began to grow rapidly; leading to a decline in the value of the NZD/USD pair. However, in late 2006, that changed as the New Zealand economy started to surpass the growth seen in the United States. Soon, the NZD/USD pair was on a slow, yet steady uptrend.
The uptrend would reverse directions in 2008 as the worldwide economic recession that became known as the economic crisis of 2008 and 2009 started to become apparent. At this time, both the New Zealand dollar and the United States dollar would dramatically fall in value. However, since the NZD fell faster than the USD, the currency pair would start to move into bearish territory.
In late 2008, the New Zealand economy was off to an early recovery from the financial devastation felt early in the year. Because the United States economy continued to struggle, the value of the currency pair would climb dramatically. From early 2010 to early 2015, we would continue to see slow and steady growth as economic conditions in New Zealand continued to outpace economic conditions in the United States. However, in early 2014, the value of the pair would decline as US economic growth skyrocketed. Since then, the NZD/USD currency pair has been on a relatively bearish path.
What Causes Price Movement In the NZD/USD Currency Pair?
When it comes to any currency pair, there are three main factors that tend to cause movement. Those include the economic conditions around the world, in the region represented by the first currency in the pair, and in the region represented by the second currency in the pair. Here's how it works…
- Worldwide Economic Conditions – When economic conditions around the world are poor, the United States dollar tends to hold value better than the New Zealand dollar. However, as economic conditions improve, the NZD tends to recover faster than the USD.
- New Zealand Economic Conditions – When economic growth in New Zealand is moving at a slow rate, we tend to see declines in the value of the NZD/USD currency pair. However, when economic conditions in New Zealand are positive, we tend to see the value of the pair increase.
- United States Economic Conditions – When economic conditions are positive in the United States, we see declines in the value of the currency pair. However, in times of economic hardship in the United States, the NZD/USD currency pair tends to rise in value. It's also important to note that the United States Federal Reserve monetary policy also plays a key role in growth. So, it's important for traders to watch the clues given by the Federal Reserve with regard to changes to the United States monetary policy.