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The history of the New Zealand dollar
Compared to most major currencies, the New Zealand dollar is still rather young.
The New Zealand dollar (NZD, $) is the official currency of New Zealand that includes the territories of Niue, Ross Dependency, Tokelau and Cook Islands, as well as the British Overseas Territory, Pitcairn Islands.
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In 1934, New Zealand’s central bank, the Reserve Bank of New Zealand was established. Until then, the UK was in charge of setting monetary policy. The New Zealand dollar was introduced in 1967 to replace the New Zealand pound at rate of two dollars to one pound. The former pound £sd system was seen as too complicated, and didn’t use decimals. With the issuance of the new currency came the passing of The Decimal Currency Act to officially switch to a decimal currency.
Initially, words such as “fern”, ” kiwi” and “zeal’ were suggested as names for the new currency, as not to confuse with other “dollar” currencies. However, dollar became the name, and a cartoon dollar character called “Mr. Dollar” became the image that was used to help the public with the transition.
Value and exchange rates of the New Zealand dollar
As of 2016, the NZD is the 11th most traded currency in the world. Foreign exchanged traders use the term “kiwi” and the symbol NZ$ to distinguish it from other dollar denominated currencies. The contribution the NZD to the international foreign exchange market is still considerably more than its relative share of GDP or population.
There has been no link between the New Zealand dollar and gold or a precious metal, so its value depends on the amount in circulation. This has contributed to the country’s large and long term rates of inflation.
The table below shows how the New Zealand dollar fared against some important currencies over time.
The values are averages of the corresponding yearsBack to top
History of the New Zealand dollar
The New Zealand dollar initially pegged to the US dollar, when one New Zealand dollar valued at USD1.43. In November 1967, after the British pound’s devaluation, one New Zealand dollar traded at USD1.12. In 1971, the US decided do away with the gold standard, and by December the New Zealand dollar pegged at USD1.216.
In between July 1973 to March 1985, a trade-weighted basket of currencies called the trade weighted index (TWI) determined the value of the New Zealand dollar. In September 1974, Australia decided to peg its currency against the TWI to try and minimize fluctuations caused by the US dollar. In November 1976, the peg to the TWI changed to a moving peg, which changed the peg’s actual value.
In March 1985, the New Zealand dollar switched to the floating exchange rate system, and one New Zealand dollar initially traded at USD0.444. Since then financial markets have determined this currency’s value, and its value against the US dollar has fluctuated in between USD0.40 to USD0.88. Towards the end of the 1990s, the US dollar started to lose its overall influence over the value of the New Zealand and Australian dollar against other currencies.
Currency trading tends to affect the value of the New Zealand dollar significantly. In June 2007, the Reserve Bank of New Zealand ended up selling an undisclosed amount of New Zealand dollars for nine billion US dollars trying to decrease the value of the New Zealand dollar. This was the first time the bank intervened in the exchange markets since it joined the floating system.
Right before the global economic downturn, the NZD was at a record high. But the affects sent the value plummeting, with the NZD bottoming out at USD0.50 in March 2009. By November 2009 there was an upturn and it rose to the USD0.75 mark. Towards the latter part of 2012, the New Zealand dollar valued at over USD0.80, even seeing as high as USD0.85.
Coins and banknotes of the New Zealand dollar
When the New Zealand dollar was introduced in 1967, coins came in denominations of 1c, 2c, 5c, 10c, 20c, and 50c. The 1c and 2c coins were bronze, the others were cupro-nickel. The obverse designs of all the coins featured a portrait of Queen Elizabeth II. However, the reverse sides of the coin were not the original design of modern art and sculpture. These images, that were leaked to the press, were met with negative reactions. The final design were more conservative and was met with public acceptance.
In 1990 the 1c and 2c coins were taken out of circulation, which meant that all cash transactions were to be rounded to the nearest 5c, a process know as Swedish rounding. In 2006 the Reserve Bank took the old 5c coin out of circulation and to made the 50c, 20c and 10c coins smaller and and lighter.Back to top
In 1967, the central bank released banknotes in denominations of $1, $2, $5, $10, $20 and $100. A change of printer in 1981 saw a slight change to the notes. The bank introduced s $50 note in 1983, and it discontinued the $1 and $2 notes in 1991. It released a new series in 1992, and polymer notes replaced paper notes in 1999.
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