NZD/USD is a currency pair classified as one of the Majors. The New Zealand Dollar is considered a commodity currency and carries the highest yield among the major currencies.
The most common nickname for the New Zealand Dollar is Kiwi. The currency pair is sometimes referred to as the Kiwi, or Kiwi Dollar. The nickname is a commonly given to New Zealand citizens and stems from their national flightless bird.
The New Zealand Dollar tends to have correlated movements with other commodity currencies such as the Australian Dollar and Canadian Dollar because of similarities in their economies.
Because New Zealand tends to offer the highest interest rate among the major economies, the currency is often used in carry trades. As these trades gain popularity during periods of increased risk appetite, the NZD/USD will carry positive correlation with other risk-based assets, such as the equity markets. These correlations tend to be strongest when there is clear risk sentiment driving the markets, and are known to diverge often.
When Does NZD/USD Experience Volatility?
NZD/USD tends to experience its highest volatility during the North American and European overlap, similar to most majors. The pair tends to have fairly steady volatility during other parts of the day as well, as economic releases are scheduled during the Asian session, a time that is usually quiet for the other currency pairs.
Who Trades the NZD/USD?
NZD/USD is commonly traded by investors looking for yield through a carry trade. The higher cost associated with shorting the pair deters traders during extended periods of US Dollar strength. The commission on the currency pair tends to be higher than most majors, if not the highest. For this reason, the pair is less popular among scalpers.
Position traders and intraday traders tend to drive more volume in the pair. The pair is also known to offer volatility during Asian hours, and often as the North American session tends to slow ahead of the Asian open, traders will look to the pair for volatility, especially if there is an economic release on the schedule.
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