New Zealand dollar

New Zealand dollar
Tāra o Aotearoa (Māori)
$100 $2
ISO 4217 Code	NZD
User(s)	New Zealand 5 territories  Cook Islands (New Zealand), alongside Cook Islands dollar  Niue (New Zealand)  Pitcairn Islands (UK) Ross Dependency (New Zealand) Tokelau (New Zealand)
Inflation	1.7% (New Zealand only)
Source	Reserve Bank of New Zealand, September 2009
Pegged by	Cook Islands dollar at par
Subunit
1/100	cent
Symbol	$
cent	c
Nickname	kiwi
Coins	10c, 20c, 50c, $1, $2
Banknotes	$5, $10, $20, $50, $100
Central bank	Reserve Bank of New Zealand
Website	www.rbnz.govt.nz
Printer	Note Printing Australia (provides base polymer note material)
Website	www.noteprinting.com

The New Zealand dollar (sign: $; code: NZD) is the currency of New Zealand. It also circulates in the Cook Islands (see also Cook Islands dollar), Niue, Tokelau, and the Pitcairn Islands. It is divided into 100 cents.

It is normally written with the dollar sign $, or NZ$ to distinguish it from other dollar-denominated currencies. In the context of currency trading, it is often informally called the "Kiwi", since kiwi are commonly associated with New Zealand and the $1 coin depicts a kiwi. It is one of the 12 most-traded currencies in the world.

History

Introduction

Before the New Zealand dollar, the currency of New Zealand was the pound, which had been distinct from the pound sterling since 1933.

Switching to decimal currency to replace the cumbersome and complicated £sd system had been proposed in New Zealand since the 1930s, although only in the 1950s did any plans come to fruition. In 1957, a committee was set up by the Government to investigate decimal currency. The idea fell on fertile ground, and in 1963, the Government decided to decimalise New Zealand currency.^[1]

The Decimal Currency Act was passed in 1964, setting the date of transition to 10 July 1967. Words such as "kiwi" and "zeal" were proposed to avoid confusion with the word "dollar", which many people at the time associated with the United States dollar. in the end, the word "dollar" was chosen, and Mr Dollar became the symbol of transition in a huge publicity campaign.^[1]

On 10 July 1967 ("Decimal Currency Day"), the New Zealand dollar was introduced to replace the pound at a rate of two dollars to one pound (ten shillings to one dollar, ten cents to one shilling). Some 27 million new banknotes were printed and 165 million new coins were minted for the changeover.^[2]

Exchange rate

The NZ$ was initially pegged to the US dollar at US$1.39 = NZ$1. This rate changed on 21 November of the same year to US$1.12 = NZ$1 after the devaluation of the British pound (see Bretton Woods system), although New Zealand devalued more than the UK.^[3]

In 1971 the US devalued its dollar relative to gold, leading New Zealand on 23 December to peg its dollar at US$1.216 with a 4.5% fluctuation range, keeping the same gold value. From 9 July 1973 to 4 March 1985 the dollar's value was determined from a trade-weighted basket of currencies.

The NZD was floated on 4 March 1985 at the initial rate of US$0.4444. Since then the dollar's value has been determined by the financial markets, and has been in the range of about US$0.39 to 0.82.

The dollar's post-float minimum average daily value was US$0.3922 on 22 November 2000, and it set a post-float maximum on 27 February 2008 of US$0.8213. Much of this medium-term variation in the exchange rate has been attributed to differences in interest rates.

The New Zealand dollar's value is often strongly affected by currency trading, and is among the 12 most-traded currencies.^[4]

On 11 June 2007 the Reserve Bank sold an unknown amount of New Zealand dollars in an attempt to drive down its value. This is the first intervention in the markets by the Bank since the float in 1985.

Two suspected interventions followed, but they were not as successful as the first: the first appeared to be initially effective, with the dollar dropping to approximately US$0.7490 from near US$0.7620. However, within little more than a month it had risen to new post-float highs, reaching US$0.8103 on 23 July 2007.

After reaching its post-float record high in early 2008, the value of the NZD plummeted throughout much of the 2nd half of 2008 and the first quarter of 2009 as a response to the global economic downturn and flight by investors away from 'riskier' currencies such as the NZD. The NZD bottomed out at approximately US$0.50 on March 6, 2009.^[5] However, it rebounded strongly as the year progressed, reaching the US$0.75 range by November 2009.^[5]

Half Pounds

In adopting the dollar, New Zealand followed the pattern of South Africa, and Australia in that when it adopted the decimal system, it decided to use the half pound unit as opposed to the pound unit of account. The choice of the name dollar was motivated by the fact that the reduced value of the new unit corresponded more closely to the value of the US dollar than it did to the pound sterling.

Coins

History

On the introduction of the dollar, coins came in denominations of 1c, 2c, 5c, 10c, 20c, and 50c. The 1c and 2c coins were bronze, the others cupro-nickel.^[6] To ease transition, the 5c, 10c and 20c were the same size as the sixpence, shilling and florin that they respectively relaced. Until 1970 the 10c coin bore the additional legend "One Shilling". The obverse designs of all the coins featured Arnold Machin's portrait of Elizabeth II, with the legend ELIZABETH II NEW ZEALAND [date]. The reverse sides of coins introduced in 1967 did not follow the designs that were originally intended for them. Those modern art and sculpture themed designs were leaked to a newspaper and met a very negative public reaction. The final releases were given more conservative designs in line with public expectations.

In 1986, New Zealand adopted Raphael Maklouf's new portrait of the Queen. The 1c and 2c coins were last minted for circulation in 1987, with collector coins being made for 1988. The coins were demonetised on 30 April 1990.^[6] The lack of 1c and 2c coins meant that cash transactions were normally rounded to the nearest 5c (10c from 2006), a process known as Swedish rounding.

On 11 February 1991, aluminium-bronze $1 and $2 coins were introduced to replace existing $1 and $2 notes.^[6] In 1999, Ian Rank-Broadley's portrait of the Queen was introduced and the legend rearranged to read NEW ZEALAND ELIZABETH II.

On 11 November 2004 the Reserve Bank announced that it proposed to take the 5c coin out of circulation and to make the 50c, 20c and 10c coins smaller and use plated steel to make them lighter. After a three-month public submission period that ended on 4 February 2005, the Reserve Bank announced on 31 March that it would go ahead with the proposed changes. The changeover period started on 31 July 2006, with the old coins usable until 31 October 2006.^[6] The old 50c, 20c, 10c and 5c pieces are now no longer legal tender, but are still redeemable at the Reserve Bank. Prior to the change over these coins were similar, save for the legend and reverse artwork, to international (mainly Commonwealth) coins of the same British-derived sizes, which led to coins from other currencies, particularly older coins, being accepted by vending machines and many retailers.

Current circulating coins

Image			Value	Technical Parameters				Description			Date of issue
Obverse	Reverse	Edge		Diameter	Thickness	Mass	Composition	Edge	Obverse	Reverse
			10c	20.50 mm	1.58 mm	3.30 g	Copper-plated steel	Plain	Queen Elizabeth II	A Māori koruru, or carved head.	31 July 2006
			20c	21.75 mm	1.56 mm	4.00 g	Nickel-plated steel	"Spanish Flower"	Queen Elizabeth II	Māori carving of Pukaki, a chief of the Ngati Whakaue iwi[7]	31 July 2006
			50c	24.75 mm	1.70 mm	5.00 g		Plain		HM Bark Endeavour and Mount Taranaki
			$1	23.00 mm	2.74 mm	8 g	Aluminium bronze	Intermittent milling	Queen Elizabeth II	Kiwi and Silver Fern	11 February 1991
			$2	26.50 mm	2.70 mm	10 g		Grooved		Kotuku (Great Egret)
These images are to scale at 2.5 pixels per millimetre. For table standards, see the coin specification table.

Banknotes

In 1967, notes were introduced in denominations of $1, $2, $5, $10, $20 and $100, with all except the $5 replacing their pound predecessors. The original series of dollar notes featured a portrait of the Queen on the obverse, while the reverse featured native birds and plants. The notes were changed slightly in 1981 due to a change of printer - the most noticeable difference being the portrait of the Queen, whom had been updated and now was facing forward, not to the left. The $50 note was added in 1983 to fill the long gap between the $20 and the $100 notes. $1 and $2 notes were discontinued in 1991 after being replaced with coins.

A new series of notes was introduced in 1992. The obverse of each note featured a notable New Zealander, while the reverse featured a native New Zealand bird and New Zealand scenery. In 1999, polymer notes replaced the existing paper notes. The designs remained much the same, but were changed slightly to accommodate new security features, with the most obvious changes being the two tranparent windows.

Current circulating banknotes

Image		Value	Dimensions	Main Colour	Description			Date of issue
Obverse	Reverse				Obverse	Reverse	Watermark
		$5	135 mm × 66 mm	Orange	Sir Edmund Hillary Aoraki/Mount Cook	Hoiho (Yellow-eyed Penguin) Campbell Island scene	Queen Elizabeth II	1999
		$10	140 mm × 68 mm	Blue	Kate Sheppard White camellia flowers	Whio (Blue Duck) River scene
		$20	145 mm × 70 mm	Green	Queen Elizabeth II New Zealand Parliament Buildings	Karearea (New Zealand falcon) New Zealand alpine scene
		$50	150 mm × 72 mm	Purple	Sir Apirana Ngata Porourangi Meeting House	Kōkako (Blue wattled crow) Conifer broadleaf forest scene
		$100	155 mm × 74 mm	Red	Lord Rutherford of Nelson Nobel Prize medal	Mohua (Yellowhead) Beech forest scene
These images are to scale at 0.7 pixels per millimetre. For table standards, see the banknote specification table.

History of NZD foreign exchange rates

With the breakdown of the Bretton Woods system in 1971, both Australia and NZ converted the mostly-fixed foreign exchange regimes to a moving peg against the US dollar.

In September 1974, Australia moved to a peg against a basket of currencies called the trade weighted index (TWI) in an effort to reduce fluctuations associated with its peg to the US dollar.

The peg to the TWI was changed to a moving peg in November 1976, causing the actual value of the peg to be periodically adjusted.

Since the late 1990s, and certainly since the end of the Cold War the US dollar has had less and less overall influence over the value of both the NZD and AUD against other currencies.

Inflation and Deflation

Because the NZ Dollar has been a fiat currency for such a long time, very large and long term rates of inflation are possible. As an example the series "Pioneer House" (TVNZ, 2001) the #2 Grey Lynn, Auckland house sold originally for 200 NZ Pounds but as of 2001 sold for 321,000 NZ Dollars [1].

See also

• Economy of New Zealand
• Cook Islands dollar
• Pitcairn Islands Dollar
• Australian Dollar
• Niue dollar

References

External links

• International economics–History of the regulation surrounding the NZ$ exchange rate
• National Bank of New Zealand–View the current exchange rate graphs of NZ$/inr
• Change for the Better–Information about changes to coins from 31 July 2006.
• Reserve bank of New Zealand- Money issuing Authority
• Historical New Zealand Trading bank notes–Old extremely rare banknotes of New Zealand
• New Zealand banknote history
• Legal and economic framework
• Images of historic and modern New Zealand bank notes