Exchange rate hammerings for NZers

Exchange rates with the US and Aus have slid down for sure but I'm surprised how much we've slid against more touristy destinations like Malaysia and Thailand which are not in the least solid economies.

How come we're preforming so bad against some very flimsy, pretty low-GDP economies (which also have major political and export issues ongoing)?

Since July this year the $NZ has slid almost 26% against the Thai baht (from 25.3 to 18.81 - hasn't been that low since about 1999) and and 22% against the ringgit (from 2.48 to 1.93).

Last year a solid three-star hotel in KL which I paid 250MYR for was about NZ$100.. The same amount of NZ$ would now barely get you a two-star hotel.

(Worse yet, most things in Thailand in particular seem to have gone up about 25% in price in the past three years... meaning stuff is about 50% more expensive when you factor in the sliding exchange.)

How come we're being so hard hit? Is it our economy size?.. smaller and bounces around a bit more?

R

No its because it was artificially high due to our high interest rates and money coming in from Asian countries with low interest rates - borrow in Asia and lend in NZ.

Now all the money is going back home so they're selling NZ$ and down it goes.

Pretty gutted atm as we are off to Canada/US in a few weeks :/

Bob are you going to pre buy currency before you go?
http://mytravelcard.co.nz/

I'm considering buying some USD in case our dollar drops in the next 4 weeks - is it likely to drop any further?

Farkn hell...just had a look....

I'm moving to Melbourne in January, any chance it will bounce back a bit before then?

Nah I usually just use CC.

Went through the effort of a Euro account a while back but its not really worth it.

you missed your chance 6 weeks ago when AUD/NZD went to 1.06 and now its reverting to mean so 1.2 quite likely imo. At least its not nearly 1.3 like it was in the middle of the year (when I took the family over - tho I'd hedged the cost months before)
Its both trendy and volatile this pair, and goes to extremes - you should avoid being forced to convert a lot of money at once at a bad time , stagger if you can.

wrote a big reply to your OP too Rob. but biggie ate it
fuck you whoever is the IT person for biggie.

ctrl c = P

Sux when that happens. What was the general drift?

we are a risky country due to our penchant for debt!

and that risk (in the form of generally high interest rates) rewards those who speculate with our currency and that magnifies volatility. the hot money came in and is now fleeing.
cant comment so much on those asian economies tho.

I saw that rate but I wont haven all my money together until after Christmas anyway.

I don't have to transfer it all over at once so will just keep an eye on things and see how it goes.

On the flipside though now is a good time to get out of NZ (say japan) and save that 20% deposit needed to buy a house. This currency and interest rate volatility is very similar to the Asian flu crisis of 98.

we went up against the czech crown =)

(at least to the point whilst i was there last month... didnt watch it after that)

Not sure what you’re referring to here.

If you’re talking about the size of their GDP relative to the US then that’s correct.

But relative to NZ, both those countries have way larger GDPs. When adjusted for PPP, the IMF ranks Thailand at #24 and the World Bank at #23, while Malaysia is #30 and #29 (for 2007). New Zealand is ranked #58 and #57. Malaysia’s GDP (smaller than Thailand) is also 3 times that of NZ’s. Malaysia for 2008 is projected to meet its 5% GDP growth, with projections for 09 being 1.5%. Slow, but definitely not a recession…. yet.

In terms of “flimsy”, well I don’t know. That really depends on what aspects of the economy you’re talking about. Sure it suffers from things like corruption for example, but I would argue Malaysia for has much more depth in its economy (in terms of its industries, its resources and its overall balance sheet). Where it lacks most obviously (to me) is sufficient skilled human capital and higher wages or wage parity.


Regardless of what NZ’s exchange rate is to the US, the exchange rate between NZ vs Thailand, Malaysia or “insert country here” will also depend on the levels of trade that both nations engage directly in with each other. Also taken into account will be the capital inflow or outflows between the two nations.

Malaysia for example has unpegged its currency as of early last year I think – which is why its fate is no longer as much tied to the USD than it was before and its also why the NZD was so high against the RM for some time (as a consequence of the NZD being strong against the USD).

Asia is probably one of the last continents to start feeling the effects of the current financial crisis. They WILL feel it, however, but it will be down the line as the western economies demand for Asian exports start to shrink. There are a lot of reasons, from the way financial institutions are governed or owned in Asia, to factors such as the majority of FDI into Asian economies generally being tied up in local JV’s or in the setting up of brick and mortar businesses as opposed to short term portfolio investments as in other western economies (or in NZ for example, where it is tied up in bonds and the funding of domestic mortgages). As NZ’s interest rates decline, all these ‘investments’ will start getting drawn upon and as a result, will increase the strength of its home nation’s currency relative to the NZD.

From personal experience, I know of a Malaysian with a term investment in NZ of a six-digit value, who is planning to withdraw his funds on maturity of the term before the exchange rate deteriorates any further. I wonder how many more investors of that nature are going to be making that decision within the next couple of months?

I’ve got a close relative who runs a construction business in Malaysia (dealing in commercial development and government projects), who also has interests in NZ. He seems to think that Malaysia and its neighbours aren’t yet feeling the deep end of the current crisis yet, but we both agree that the litmus test will be in February next year, when a huge part of the continent enters into its annual Chinese New Year cycle and try to clear all debtors and creditors – that will be a very clear test of how much ‘real cash’ is being flogged around vs ‘paper money’.