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The Weakening Fijian Dollar Against USD

The Fijian Dollar (FJD) continues to weaken against the USD over the past three months. This is mostly driven by the AUD which has the largest weighting in the FJD
13 Dec 2014 10:02
The Weakening Fijian Dollar Against USD
The Fijian Dollar Performance over the Past Three Months

The Fijian Dollar (FJD) continues to weaken against the USD over the past three months.

This is mostly driven by the AUD which has the largest weighting in the FJD basket.

The FJD as a pegged currency is fixed to a basket of currencies namely the USD, AUD, EUR, NZD and JPY.

The net movement in the basket of currencies is basically where the FJD opens daily and is announced by the Reserve Bank of Fiji around 9 am Fiji time.

The other type of currency is floated, meaning they are driven by supply and demand and yes you also have the odd semi float.

The key driver over the last three months in the FJD was the strengthening of the FJD over the AUD to 0.59 cents from around 0.56 cents.

Placing imports from Australia at cheaper exchange rates. However this places stress on any forward bookings in AUD.

Forward bookings are namely for companies that have dealing limits at respective banks, these contracts are used to pass on the foreign exchange risk to banks.

However, the opposite of imports is exports and such, makes export proceeds in AUD weaker as they begin to yield less FJD.

Big announcements

Conclusively, this week’s major Economic Data Announcements were:

– A correction was noted on Thursday as employment numbers for Australia came out better by 42,000 compared to a previous 13,700. Placing rates to 0.5900

– NZD interest rate announcement had interest rates maintained at 3.50%, however the NZD still climbed higher by approximately 1.50 cents or 0.6250 against the FJD

– The JPY remains at current import levels of 57.80 as she awaits Prime Minister elections on the 14 December

– The EUR has appreciated against the FJD making sugar exports more favorable and mainly driven by positive response to Greece bonds

Overall

The graph depicts how the FJD performed over the past three months.

Mainly with a high of 0.5129 and a low of 0.4951 which will continue to hurt imports or repayment of USD loans.

Surveyed analysts suggest trend could continue to 0.4800 over the next three months. However, latest corrections in the AUD and NZD will be closely watched.

Key drivers will be economic data out of USA and China. Followed by key commodities like gold, steel, wheat and oil as key macro indicators.

Seems like this Christmas, Fiji will have better import prices for New Zealand and Australian goods, namely in dairy, fruits and meat.

Tourism against a strong USD could find tourists flying shorter distances around their own countries in Australia and New Zealand or to Fiji.

– This is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at HFC Bank, Peter Fuata.

 




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