Transferring money to New Zealand? Strong AUD could help
Things are looking up for Aussies sending money overseas to New Zealand as AUD/NZD exchange rates hit a two-year high last week.
For the first time since August 2018, the Aussie dollar was trading above 1.10 New Zealand dollars on Tuesday. That’s far above levels observed back in April when, according to SendFX’s co-founder Ian Cragg, “you would have been buying NZD 0.99 for 1 AUD”.
Cragg said the Reserve Bank of New Zealand’s (RBNZ) move to increase its cap on quantitative easing (QE) by 40% triggered the further decline in NZD value.
For context, QE is where a country’s central bank purchases bonds with an aim of reducing long-term interest rates and spurring economic activity.
“Immense pressure is on the NZD at the moment as the RBNZ said they are not comfortable with a strong dollar,” Cragg said.
“The RBNZ also hinted they may cut the OCR [official cash rate] into negative territory early next if their QE program doesn’t have the desired effect on the New Zealand economy which is applying further pressure on the NZD.”
While the AUD/NZD exchange rate has slid a little in strength since its peak last week, the good news is it’s still riding its high. As of today, 24 August, the mid-market rate sits at 1.09529*, which means every Aussie dollar is worth just under NZD 1.10.
So is now a good time to transfer money to New Zealand?
The short answer is yes, as the strong Aussie dollar may not be here to stay for much longer.
“Although the AUD has performed extremely well since the collapse at the beginning of the pandemic, there are still large risks facing the Australian economy and the dollar,” Cragg says.
“Australian unemployment is expected to hit 10% by the end of the year with the current lockdown in Melbourne predicted to hit the economy hard.
“As state borders are likely to shut for the rest of the year, inter-state tourism is going to be low to non-existent which will hurt the economy further.”
For now though, if you’re an Aussie resident shopping around for the cheapest international money transfer deals, you’ll likely find exchange rates are tipped in your favour. And this good timing means you’ll naturally get more bang for your buck.
For instance, say you’re sending AU$10,000 to New Zealand. Four months ago, when the mid-market exchange rate was 1.06191, you might have received about NZ$10,619. But fast forward to this morning and the mid-market rate is a much higher 1.09529, which means you could be getting potentially NZ$333 more, just by transferring your money today instead of back in April.**
Bear in mind the example above doesn’t factor in the margins or fees that different banks or IMT providers might charge on top. So getting a great deal even when exchange rates are favourable will depend on you doing your homework.
Or if you aren’t looking to send funds to New Zealand just yet but still want to take advantage of today’s rates at a future date, then a forward contract might be what you’re after.
This tool works to protect you against currency exposure and volatility, giving you certainty of a fixed deal. Forward contracts are offered by many specialist IMT providers including SendFX, TorFX, OFX and WorldFirst.
Wondering what AUD/NZD exchange rates are up for grabs today? Scroll down below to see a snapshot of what’s on offer, or jump over to our international money transfers comparison table for more options.
*Mid-market exchange rate drawn from XE Currency Converter, as of 10am, 24 August 2020.
**Comparison of mid-market exchange rates as of 10am on 24 April 2020 vs 10am on 24 August 2020, drawn from XE Currency Converter.
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