Box B Cross currency basis swaps Kauri issuers use cross-currency basis swaps to reduce exchange rate risk by converting the New Zealand dollars
they receive at issuance into US dollars or another currency.
An important factor in the New Zealand dollar
's favor is the performance of prices for the country's main commodity exports.
Travelex said pre-orders for New Zealand dollars
were 26 per cent up compared with this time last year.
He was also fined 600 New Zealand dollars
(pounds 230) on the charge of careless driving causing injury.
Like many borrowers, New Zealand banks found it relatively more difficult and costly to raise foreign currency funding, but initially relatively cheap to swap (into New Zealand dollars
) the USD funding that they did raise.
Foreign investors use FX swaps to convert foreign currency to New Zealand dollars
, to finance purchases of New Zealand assets.
While the New Zealand bank could borrow New Zealand dollars
offshore directly, it generally finds it cheaper to borrow foreign currency in the international capital market and swap the proceeds and associated stream of interest payments for domestic currency funding.
First, an appreciation of the New Zealand dollar
means a deterioration of the current account (exporters receive less foreign currency and cheaper imports stimulate import demand) which implies a fall in demand for New Zealand dollars
Reserve Bank Governor Alan Bollard said "We have recommended that when the New Zealand dollar
is exceptionally and unjustifiably high, the Reserve Bank would be able to use New Zealand dollars
to buy foreign exchange, which would put downward pressure on the exchange rate.
Those receipts will be in US dollars, but the exporter wishes to receive New Zealand dollars
. In addition, this exporter wishes to fix today the amount of New Zealand dollars
they will receive.
Thirdly, the Reserve Bank could intervene directly in the foreign exchange market, by buying New Zealand dollars
with some of the foreign exchange reserves which we currently hold.
This article discusses the results of the 2013 survey and recent trends in the foreign exchange market, based on both data sources, with a focus on the New Zealand dollar