Among November's best performers, the Australian dollar came second with
a 4.91% rise. The rest of the list is composed of the British pound, up
2.65%; the Canadian dollar, up 2.53%; the Chinese yuan, up 2.16%; the
euro, up 1.89%; the Swiss franc, up 1.3%; and the Japanese yen, up 0.7%.
This list shows that AUD and NZD, as currencies of commodity-exporting
countries, have outpaced their peers due to the support from the
upcoming vaccination and the dynamic expansion of global stock markets.
The AUD's performance was inferior to the NZD's because Australia saw
severe outbreaks and continued reduction of China's import dependence on
its products.
In fact, NZD has been poised to rebound from the low of 0.6553 when
New Zealand Prime Minister Jacinda Ardern was re-elected with an
overwhelming victory on Oct. 17. At the time of writing, NZD/USD has
reached a two-year high of 0.7047. The positive dynamic was attributed
to Ardern's landslide victory, which shrugged off political
uncertainties. But the most important reason is New Zealand's success in
fighting against Covid-19. Led by Ardern, the country outperformed
other peers in Europe and the US and even beat neighboring Australia. As
of Nov. 30, the country only had a total of 2056 cases confirmed, of
which 25 people have died from the virus. Its economy secured prudential
stability without any significant lockdown. Although New Zealand's GDP
in Q3 has not yet been announced, NZD is expected to embrace an
uninterrupted rally as the financial market has braced for a sharp
rebound. As a commodity currency, the New Zealand dollar is mostly
sensitive to the prices of dairy products. Thus another boost for NZD is
the international dairy prices that have been growing since September.
The New Zealand dollar had been receiving pressure since mid-August,
when the Reserve Bank of New Zealand (RBNZ) announced the expansion of
quantitative easing and signaled negative interest rates. But a dramatic
shift appeared recently. New Zealand Finance Minister Grant Robertson
said on Nov. 24 that the government was reviewing policies relating to
the housing market and had sought advice from the central bank. With
worries that New Zealand's loose monetary policy would push local
property into bubble territory, Robertson advised the RBNZ Governor
Adrian Orr to include stabilizing house prices as a factor for
consideration in the remit when formulating monetary policy. The New
Zealand dollar rocketed in the wake of such news. Everyone believed that
New Zealand would not only ignore the negative interest rate, but also
no longer increase the money supply., implying a halt to the RBNZ's
quantitative easing.
Actually, effective vaccines are available for the world in early to
mid-December since major pharmaceutical companies in the UK and the US
have successively announced successful development. It will help resume
economic activities and lift the global economy and stock markets,
putting a premium on NZD and AUD. Therefore, from my point of view, the
above positive factors will encourage the New Zealand dollar to triumph
over other non-US currencies in December.
