Cryptocurrency Market Forecast: Causes of Depreciation, Future Outlook, and Investment Strategies

New Zealand Dollar (Currency code: NZD), commonly known as the Kiwi, is one of the most actively traded currencies worldwide. Its price movements have always been a key focus for forex traders and cross-border investors. Since New Zealand adopted a flexible exchange rate system in 1985 and the Reserve Bank ceased pegging it to a trade-weighted basket, the Kiwi has become an important indicator of New Zealand’s economic health. In the international forex market, the NZD/USD currency pair ranks ninth in trading volume, attracting substantial daily capital flows.

However, in recent years, the Kiwi’s performance has been less than ideal. From its all-time high of 0.88 USD in 2014, it has fallen to just above 0.50 USD, depreciating approximately 32%. This persistent downward pressure has prompted investors to reconsider its future trajectory.

Fundamentals of the Kiwi: The Commodity Currency Logic Behind Its Depreciation

To understand the core of NZD forecasts, it is essential to recognize its commodity currency characteristics. Australia and New Zealand are typical export-oriented economies, mainly producing coal, iron ore, copper, aluminum, wool, and other bulk commodities, along with agricultural and dairy products. Over two-thirds of New Zealand’s exports come from agriculture-related industries.

Due to this economic structure, the Kiwi and the Australian dollar are often called “commodity currencies”—their values depend not only on government creditworthiness but also directly reflect supply and demand in the bulk commodity markets. When international prices for agricultural products, dairy, and wool rise, New Zealand’s export income increases, often strengthening the Kiwi; conversely, falling prices exert downward pressure.

Since the pandemic, the global economy has shifted from expansion to recession, with demand for commodities notably declining, directly impacting New Zealand’s export-dependent economy. Meanwhile, tourism, another major pillar of the economy, remains sluggish post-pandemic, leading to a significant drop in foreign exchange income and further intensifying the Kiwi’s depreciation.

The U.S. Dollar Strengthening and Interest Rate Differentials: External Pressures on the Kiwi

In Kiwi forecasts, the Federal Reserve’s policies cannot be ignored. In recent years, the Fed has adopted aggressive rate hikes, causing U.S. dollar interest rates to rise continuously, and the interest rate differential with the Reserve Bank of New Zealand has widened. Driven by this differential, international capital tends to flow into U.S. dollar assets for higher yields, resulting in a persistent strengthening of the dollar against the Kiwi.

This interest rate differential exerts direct pressure on the NZD/USD exchange rate. When the dollar appreciates and the Kiwi depreciates, import prices denominated in Kiwi rise, further dampening New Zealand’s economic outlook and creating a negative feedback loop.

Global sudden events also play a significant role. As an economy heavily reliant on exports, New Zealand is highly sensitive to changes in the international trade environment. Geopolitical conflicts, disruptions in global supply chains, and escalating trade tensions can quickly impact the Kiwi’s exchange rate.

Market Outlook: Predictions from Major Investment Banks on the Kiwi

According to forecasts from major investment banks like Corpay, the outlook for the Kiwi remains cautious. These institutions expect continued downside pressure on NZD/USD:

• Short-term (within six months): possibly down to 0.594
• Medium-term (within one year): around 0.5934
• Medium to long-term (within two years): further down to 0.5885
• Long-term (within three years): approximately 0.5834

These projections reflect a cautious stance on New Zealand’s economic growth prospects. With global economic momentum weakening and structural pressures on commodity prices, the Kiwi is unlikely to escape depreciation in the near term.

However, the Kiwi is not without opportunities. When global risk appetite strengthens and commodity prices rebound, the Kiwi, as a commodity currency, often experiences a rally. During such times, investors tend to sell safe-haven assets like the dollar and shift into high-yield currencies like the Kiwi, supporting its appreciation. Therefore, tracking global economic cycles, commodity trends, and Fed policy movements is crucial for accurately forecasting the Kiwi’s future.

Four Main Investment Channels: How to Participate in Kiwi Trading

Investors interested in the Kiwi can choose from four primary methods, each with its advantages and disadvantages:

1. Kiwi Time Deposits

Exchange TWD to NZD at the current bank rate via local banks and deposit as a fixed-term deposit. Upon maturity, convert back to TWD at the prevailing rate and earn interest on the Kiwi deposit.

Pros: Familiar operation, minimal risk, well-regulated
Cons: Limited returns, inflexible entry and exit

2. Kiwi Funds

Forex funds that invest in New Zealand dollars, managed by professional fund managers. The fund actively adjusts positions based on market trends to seek excess returns.

Pros: Professional management, diversification, higher return potential
Cons: Higher management fees, redemption restrictions

3. Kiwi Futures

Futures contracts traded on the Chicago Mercantile Exchange (CME) with the product code NE. Minimum tick size is 0.0001, with a tick value of $10, settled physically.

Futures are margin trading instruments, allowing both long and short positions with leverage. However, traders face risks of margin calls and liquidation, and futures contracts have fixed delivery dates requiring rollover.

Pros: Bidirectional trading, leverage, high liquidity
Cons: Very high risk, position monitoring required, delivery date constraints

4. Contracts for Difference (CFD)

CFDs are contracts between buyer and seller based on the price difference, without physical delivery. Traders only pay or receive the difference, with lower margin requirements and higher capital efficiency compared to futures. CFDs can be held indefinitely as they have no fixed settlement date.

CFDs offer flexible trading in both directions—long for rising markets and short for falling markets. For relatively predictable currency pairs like the Kiwi, short-term CFD trading can effectively capture swing opportunities.

Pros: Low margin, high flexibility, no forced settlement
Cons: Leverage risk, requires careful risk management

Risk Tips and Trading Recommendations

Regardless of the investment method, traders should fully understand the risks involved in Kiwi trading. As a commodity currency, the Kiwi tends to be more volatile than major currencies, easily affected by global economic cycles, policy changes, and unexpected events. Using leverage tools (futures, CFDs) can lead to rapid losses or even loss of capital with small price movements.

It is recommended that investors develop clear risk management strategies before participating, including setting stop-loss orders, controlling position sizes, and proper capital allocation. Keep close watch on the Reserve Bank of New Zealand’s policy decisions, Fed interest rate trends, global commodity prices, and geopolitical risks, as these are critical factors influencing the accuracy of Kiwi forecasts.

Economic calendar tools can help traders track key economic data releases, enabling pre-positioning or avoiding high-volatility periods. With sufficient information and risk awareness, investors can participate more confidently in the Kiwi market and seize investment opportunities.

Major Kiwi Trading Currency Pairs

Common Kiwi pairs include: NZD/USD, GBP/NZD, EUR/NZD, AUD/NZD, NZD/JPY, NZD/CHF, NZD/CAD, NZD/SGD, offering investors diverse trading options.