SUNBIZ

Major Trading Currencies

Fiji’s three major trading currencies for imports are the US Dollar, the Australian Dollar and the New Zealand Dollar. Fijian Dollar is pegged against a basket of currencies and includes
16 Apr 2016 09:05
Major Trading Currencies
Major Trading Currencies

Fiji’s three major trading currencies for imports are the US Dollar, the Australian Dollar and the New Zealand Dollar.

Fijian Dollar is pegged against a basket of currencies and includes AUD, NZD, USD, JPY and the EURO.  They are pegged against these currencies because they are Fiji’s major trading partners.

The two currencies that have the relatively bigger weights are the USD and the AUD.

The Reserve Bank of Fiji reviews the exchange rate weights on an annual basis and the weights of the five currencies are adjusted based on the most recent trade data.

Lastly, the review of the currency weights is based on the imports and exports payments in the five currencies rather than the countries.

For example, we pay for fuel in US$, even though it’s imported from Singapore.

Recently the US Dollar exchange rate has been constantly weakening and this can be depicted in Graph 1.

Graph 1 shows the average rate for January to December 2015 and January to April 2016.

The weakening of the US Dollar will benefit our USD importers meaning that they will have to pay less Fijian Dollars while purchasing the same US Dollar.

 

The US Dollar is the most traded currency in the world and The Fed in its meeting in December 2015, raised short-term interest rates for the first time in more than nine years and suggested it would raise rates four times this year but is unlikely the case at present.

Interest rate hike was delayed in January and March because of an economic slowdown in China and the collapsing oil prices.

Janet Yellen, the US Federal Reserve Chairwoman gave a speech on 29th March, 2016 urging caution in regards to hiking interest rates saying that “only gradual increases to be warranted in the future”.

Towards the end of January, 2016, oil prices began to surge because of weather conditions which sent US heating oil up more than 10 per cent helping fuel a 15 per cent gain in crude prices.

In mid-February this year, crude oil price increased further on the back of some oil producers announcing their support for overproduction freeze to reduce output in the face of one of the biggest supply gluts in decades.

OPEC and non-OPEC producers meeting comes when low crude oil prices threatened to pull global economy lower.

Their meeting is planned for April 17 in Doha, Qatar to discuss and come to an agreement on a production freezing deal; this meeting remains a strong market maker.

The only hurdle is Iran, an OPEC member whose sanction was lifted during the second week of January and they have refused to curtail production and vowed to keep pumping until production is on par with the levels seen before sanctions.

On 11 April 2016, Brent settled up 89 cents, or 2.12 per cent at US$42.83 a barrel and US crude settled up 64 cents, or 1.6 per cent, at US$40.36 a barrel.

This surge in oil prices boosts oil-linked currencies such as the Australian Dollar and the New Zealand Dollar and this can be depicted in Graph 2 and 3 respectively.

The Australian Dollar has been fluctuating on a downward trend for the year 2016 trading between 0.6100 – 0.6500.

It is getting stronger month after month from January 2016 and this will be good for exporters meaning they will be earning more Fijian dollars.

The New Zealand Dollar has been fluctuating in between 0.6800 – 0.7000 for year 2016.

Dairy products which is the country’s largest export commodity was at a point of bringing kiwi lower because of its weak price in which may prompt the Reserve Bank of New Zealand to further cut on interest rates but this may not happen given the increased oil prices and the weakening of the US Dollar.

  • On average the Import rate for the NZD was 0.6834,
  • best Import rate for the month was 0.6870 on 8 April
  • The best NZD Export rate was 0.7126 on the 1 April.

Currency volatility remains a key component for many businesses in an importer country like Fiji. Not to mention exporters are equally affected.

The above basic average, high and low rates are for discussion purposes. Managing your foreign exchange risk keeps one within budget and transfers this risk to their bankers.


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 the HFC Bank, Peter Fuata.

 

Fiji Sun Instagram
Fiji Plus
Subscribe-to-Newspaper