What is NZD/CAD?
The NZD/CAD currency pair indicates the exchange rate between the New Zealand dollar and the Canadian dollar, or the amount of Canadian dollars required to purchase one New Zealand dollar (the base currency).
The Canadian dollar is widely used in international transactions. Despite not having the same level of global dominance as the US dollar, the CAD is still regarded as a stable and dependable currency.
The New Zealand dollar is legal tender in New Zealand as well as some of its Pacific territories and affiliated states, including the Cook Islands, Niue, Tokelau, and Pitcairn Islands. It is one of the most frequently traded currencies on the worldwide currency market. New Zealand is a popular currency among currency traders due to its stable economy and relatively high-interest rates when compared to other major currencies.
When paired with other major currencies, both the New Zealand dollar (NZD) and the Canadian dollar (CAD) are considered major currencies. However, due to their lower trading volumes and liquidity when compared to major pairings, they constitute an exotic currency pair when combined.
What affects the price of the NZD/CAD pair?
Both currencies are frequently classified as commodity currencies, which means that their values are affected by movements in commodity prices. Canada is a major exporter of raw materials and minerals such as crude oil, natural gas, gold, and timber, whereas New Zealand exports a vast quantity and range of agricultural and food items such as dairy, beef, wood, and seafood.
As a result, a major reduction in the price of oil might have a detrimental impact on Canada's export revenues and currency. Any slowdown in the United States, on which Canada relies for exports, can affect the price of the Canadian dollar relative to the New Zealand dollar. Similarly, New Zealand's economy depends on its own trading partners, especially Australia and China, and the NZD may be impacted in the event of a downturn in those partners' economies.
New Zealand's economy is also heavily reliant on tourism, making the NZD vulnerable to disruptions in the sector. Travel restrictions, like during the COVID pandemic, as well as natural disasters that New Zealand is prone to, such as earthquakes and volcanic eruptions, can trigger these.
The NZD and CAD are risk-sensitive currencies, which means that market sentiment and risk appetite can affect their value. During periods of increased risk aversion, investors may seek safer assets, leading to CAD and NZD depreciation.
What to watch out for when trading NZD/CAD?
Traders of NZD/CAD should watch out for announcements from key influential organisations in both countries. These include:
- Reserve Bank of New Zealand (RBNZ) and the Bank of Canada for monetary policy and Interest Rate decisions
- Statistics New Zealand and Statistics Canada (StatCan) for data on Trade Balance, Employment Change, Unemployment Rate, Consumer Price Index (CPI), and Gross Domestic Product (GDP)
- Oil-related market events (OPEC meetings, oil inventory data)