NZD-CAD
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NZD/CAD is the ticker symbol for the New Zealand Dollar to the Canadian Dollar exchange rate on the foreign exchange market. The New Zealand Dollar/Canadian Dollar currency pair (NZD/CAD) tracks what the NZD is worth against the CAD.
The NZD (also referred to as the Kiwi) and the CAD (also known as the Loonie) are the official currencies of two major global economies – New Zealand and Canada. The NZD/CAD is regarded as a cross currency pair. The best time to trade the NZD/CAD is from 13:00 to 17:00 GMT. In other words, during the time when both the London Market and New York stock exchanges are open and when NZD/CAD spreads tend to be the tightest due to increased market liquidity.
NZD/CAD Trading History
The NZD/CAD pair combines two currencies with significant roles in the global economy. The kiwi or NZD is the currency of New Zealand – the 50th-largest national economy in the world when measured by nominal gross domestic product (GDP) – while the loonie or CAD represents the world’s 9th largest economy based on gross domestic product (GDP) and the 5th largest energy producer in the world. One of the world’s largest commodity exporters, Canada’s exports include staples such as gold, oil, and timber.
Introduced on July 10, 1967, the New Zealand dollar is a relatively new currency. In fact, the British pound was New Zealand’s currency before the New Zealand Dollar was introduced. On July 10, 1967, the NZD replaced the Pound at a rate of 2 Dollars = 1 Pound. In forex trading, the New Zealand dollar is also known as the “Kiwi” or “Kiwi dollar”, since the flightless bird, the kiwi, is depicted on its one-dollar coin. The NZD is the tenth most traded currency in the world, representing just over 2% of global foreign exchange market in daily turnover as of 2021.
The Canadian dollar is a relatively older currency as it originated in 1817 when the Bank of Montreal issued the first Canadian bank notes. The notes became the main means of payment in British North America. Today, the Kiwi to Loonie (NZD/CAD) pair is made up by the world’s 7th and 8th most actively traded currencies, respectively. Both are also leading international reserve currencies.
NZD/CAD Trading – Highs and Lows
The NZD/CAD is a highly volatile pair that has seen many highs and lows. Specifically, in 2008, when the Lehman Brothers demise triggered a global financial crisis, the NZD/CAD tumbled lower as financial market turmoil lashed on high-yield currencies, equity markets, and risky investment positions. In 2017, amid a broader bull market for riskier assets, the NZD peaked to almost reach parity with the CAD, only to later deflate again once the 2022 inflation kicked in and stock markets turned bearish.
Why Trade NZD/CAD?
While the NZD/CAD pair attracts less trading interest than other major currency pairs, such as the euro (EUR/USD) and yen (USD/JPY), it offers high liquidity during its peak trading hours, and can provide a number of important trading opportunities. What is more, the Canadian dollar’s value is closely correlated with Canada’s exports in oil, wood, and gold, which means that disruptions to energy and commodity markets can create volatility for the NZD/USD.
Major Data Influencing NZD/CAD
Here are some of the factors to consider when trading the NZD/CAD:
· Central Bank Monetary Policy
Several factors can impact the NZD/CAD rate valuation, including the Reserve Bank of New Zealand and the Bank of Canada (Banque du Canada) which will often make changes to their monetary policy, for example, by hiking key interest rates to rein in inflation. Keeping an eye out for major Central Bank announcements that can affect the NZD/CAD pair can help traders better gauge the pair’s future performance.
· Commodity Markets and Supply Chain Disruptions
The Canadian dollar is classified as a commodity currency, as it exhibits a correlation to the energy product’s crude oil and natural gas. This means that price movements in commodity markets linked to Canada’s economy and exports, such as oil, gas, timber, and gold are inextricably tied to the performance of the loonie and, by extension, the value of the NZD/CAD.
· Economic Data Releases
Economic releases including local CPI (inflation) data, employment data, gross domestic product (GDP), retails sales, purchasing managers index (PMI) and others can have a major impact on their respective currency’s price action. In short, better-than-forecast data increases the demand for related currency and impacts the value of either the New Zealand dollar or the Canadian dollar, causing fluctuations in the NZD/CAD exchange rate.
· Politics
Geopolitical tensions including trade wars affecting Canada or New Zealand, local elections, and even disruptions to oil production can also impact the NZD/CAD. What is more, with Canada being the USA’s closest, any US economic news may also be reflected in the NZD/CAD.
NZD/CAD Correlations
The NZD/CAD currency pair is predominantly affected by the correlation between New Zealand and Canada. As stated above, the CAD is positively correlated with rising oil and tinder prices, this means that when oil prices move higher, the currency pair tends to drop as the CAD gains.
Day Trading the NZD/CAD Pair
The NZD/CAD forex pair offers traders a variety of short- and long-term trading opportunities – and while the forex trading market is open 24 hours a day, 5 days a week – the best time to trade the NZD/CAD is during the time when both London Market and New York Market stock exchanges are open.
NZD/CAD Volume and Volatility
As noted above, there are specific times when certain pairs are most volatile. Significant movement in the NZD/CAD usually occurs during 13:00 to 17:00 GMT. In other words, when both London Market and New York Market stock exchanges are open.
