Currency winners and losers
US dollar surprisingly lacklustre while euro and pound make good gains
This year has been very interesting in the currency markets and certainly did not fail to deliver its share of surprises. We have experienced some extremes, from the dramatic rise of bitcoin, to the full-blown collapse of the bolivar in Venezuela. As the year draws to a close, I’ve singled out some of the winners and losers, and the key factors that could shape currency markets going forward. money is to act as a store of value over time, such as gold. Many would argue that paper currencies controlled by central banks are no longer a store of value, actively pursuing devaluation of 2 per cent per year, which is true and in part why bitcoin was developed, but the truth is bitcoin is currently neither a currency nor money. Gold is up 11.58 per cent in terms of NZ dollar and 9.85 per cent in terms of US dollar. the onset of the global financial crisis in 2008. Expectations are for these banks to continue tightening in 2018. These first movers in tightening may see their currencies rise against those countries still in need of accommodative policies and interest rates.
Our Reserve Bank has signalled that it may cut rates if needed, which could see the kiwi dollar continue to struggle in 2018. Factors such as a decline in dairy, slowing house prices and elevated personal debt levels are headwinds they are looking to steer the economy through.
We could see our domestic environment of slow but steady economic growth continue in 2018, while external shocks from geopolitical conflicts or financial shocks are the potential wild cards that could potentially heighten volatility in the new year.
*Price comparisons as at 6th December 2017