Planning A Holiday? Here's Where Your Dollar Might Go Further Than Normal

Sunday, 18 May 2025, 7:23 pm
Article: RNZ

Susan Edmunds, Money Correspondent

New Zealand's dollar has become a little stronger against the US in the past month - but if you're looking for a holiday where you can make the most of the exchange rate, that's not the part of the world to be looking in.

The NZD has been worth as much as US60c in recent weeks. But based on historical performance, it remains weak.

Data from Infometrics chief forecaster Gareth Kiernan showed, at an exchange rate of one dollar buying US58c, the dollar is 12 percent down on the USD's average exchange rate of the last 10 years and down 17 percent over 20 years.

It's down 12 percent against the euro over the 10-year period, and against the British pound.

But there are parts of the world where the New Zealand dollar is going further than normal at present. Travelling to Australia isn't so bad. The dollar is down 1 percent compared to the average of the last 10 years but up 4 percent over the last 20 years and 5 percent over the last 30.

On a 10-year average basis, the dollar is also up against the Japanese yen, up 9 percent, Indian rupee, up 3 percent, Indonesian rupiah, up 2 percent, and South Korean won, up 4 percent.

It is up 30 percent compared to a 30-year average for the Indian rupee, 20 percent for the Japanese yen and 41 percent for Indonesia.

Kiernan said the fact that the strength was limited to a smaller group of countries was due to a few factors.

"New Zealand's growth performance over the last couple of years, plus immediate prospects, remain relatively poor, so international investors are looking at other places to put their money where the expected returns might be better.

"Secondly, there's a high level of risk aversion and uncertainty at the moment, which typically count against New Zealand as well," he said.

"The latter factor might not be helped by our fiscal position, with negative comments from credit ratings agencies last year and close attention being paid to the track back towards balancing the books at next week's Budget. Our government debt levels might not be as high as many other countries, but we tend to get held to a higher standard because we're relatively small, which adds to the perception of risk."

David Coombes, chief executive of House of Travel, said there had been a slight softening in bookings to the US in the last few weeks, and the dollar could be playing a part in that.

"Our stores across the country are saying that the current exchange rate, with the New Zealand dollar weaker against the US, is influencing customer destination choices, with many looking to places where their money goes further on the ground."

A report from Mastercard analysed exchange rate movements and the number of tourist arrivals from 2000 to 2024 across 24 tourism markets to determine how much of an impact currency movements could have.

Across six tourism destinations - Japan, US, Australia, Hong Kong, Singapore and Switzerland - it estimated the change in the number of tourists arriving when the currency dropped 1 percent.

It found the biggest impact was for travel from China to Japan - a 1 percent depreciation of yen against the renminbi was associated with a 1.5 percent increase in tourists to Japan.

New Zealand visitor numbers only lifted 0.2 percent in response to the same degree of depreciation and were also less responsive to changes in the USD.

"Travellers from Asia tend to be more sensitive to exchange rate fluctuations, as such movements can significantly impact their purchasing power during international travel - an important factor in their outbound travel planning.

"In comparison, the long distances between New Zealand and most travel destinations mean that New Zealand travellers may not be able to easily alter their travel decisions based on changing foreign exchange conditions. Additionally, travellers from more developed markets are generally more influenced by local economic conditions than by FX changes."

The Mastercard analysts said the dollar would need to shift by 10 percent or 15 percent against another currency to have an impact on travel decisions.

© Scoop Media

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