Trading NZD/SGD
NZD/SGD is an exotic forex pair with interesting features that make it a noteworthy trading vehicle. The New Zealand dollar, also known as the kiwi, is the 10th most traded currency in the forex market, while the Singapore dollar is considered one of the most stable currencies in the world. The review breaks down the advantages and disadvantages of day trading NZD/SGD, its history, investing tips, a live chart, and more.
Best NZD/SGD Brokers
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Pros Of Trading NZD/SGD
- Accessibility – While the SGD is regulated by the Monetary Policy of Singapore, restrictions are limited versus currencies in neighbouring countries such as the Chinese yuan. In fact, the SGD is one of the most accessible Asian currencies available on the forex market.
- High-interest rates – The NZD is known to offer high-interest rates and is considered a carry trade currency. Its interest rate differentials after the financial crash in 2008 offer good profit potential.
- Volatility – The Singapore dollar is stable and has seen long-term growth. On the other hand, the New Zealand dollar is more volatile, considered a commodity currency with its value tied to agricultural exports. This means trading NZD against SGD can offer interesting investment opportunities.
- Resources – When trading NZD/SGD, investors have access to a range of tools, including historical graphs and live candlestick charts which make forecasts and trends easier to predict.
Risks Of Trading NZD/SGD
- Volatility – Whilst volatility can help with profits, price swings can also lead to losses. Traders should always employ risk management strategies to limit risk exposure.
- Reduced leverage – Forex trading platforms tend to offer lower leverage on exotic pairs such as the NZD/SGD compared to more established majors like the EUR/USD.
- Low liquidity – Exotic pairs generally provide lower liquidity than majors, which can result in wider spreads and increased costs.
Influences On NZD/SGD Movement
Many factors can affect the NZD into SGD market sentiment and spot rates:
- Central bank policies – The Reserve Bank of New Zealand makes important decisions that dictate NZD interest rates. Likewise, The Monetary Authority of Singapore regulates the SGD. These financial bodies affect the future performance of both currencies. Thus, keeping on top of economic announcements will help inform trading strategies.
- Commodities – As the strength of the NZD is tied to its agriculture, the value of NZD/SGD depends on the price of its commodities. As purchasing power increases, this movement is reflected in a higher exchange rate.
- Exports – As a highly developed economy with established industry sectors, Singapore’s exports drive the economy. The country is known for exporting home electronics and IT, products for shipbuilding and financial services. Tracking the relative strength of these sectors will help you make predictions about the outlook of the NZD/SGD.
- Economic growth – The value of a currency is highly dependant on the strength of its economy. It’s useful to keep up to date with economic indicators like employment rates, inflation and interest rates. For example, Singapore is known for its rapidly growing economy, with low levels of unemployment and a stable economy.
- Political stability – Another important influence is major political events. Political decisions have consequences on the value of the NZD and SGD. To gain a competitive advantage, get to grips with the political landscape in each country.
Correlations
Currencies don’t move independently. Price movement in one pair is often reflected in other pairs with a change in the same direction known as a positive correlation while a trend in the opposite direction is known as a negative correlation.
As NZD/SGD does not have a US dollar component, it is known as a cross pair. Cross pairs often move differently to majors but still in line with other currencies. For example, the movement of New Zealand’s neighbouring currency, the Australian dollar, is often positively correlated to NZD, while SGD is influenced by the USD.
- Positive correlation – This is when currencies move in the same direction as each other. For example, GBP/USD, AUD/USD and EUR/USD are all positively correlated due to the US dollar being the counter currency.
- Negative correlation – This is when forex pairs move in the opposite direction. Popular pairs with a negative correlation include USD/CHF, USD/JPY and USD/CAD. Here the US dollar is the base currency.
Application
The NZD/SGD can be traded alongside AUD/USD and USD/SGD. It is important to note, however, that correlations don’t remain stable. Economic factors and market speculation can cause shifts in currency correlations.
NZD/SGD Day Trading Strategy
Whatever trading strategy you opt for, consider the below.
Timing
Successful NZD/SGD day trading depends on timing. This means trading with high levels of volume and volatility in order to generate profits above the costs of spreads and commission. While the forex market is open 24/5, this doesn’t mean that every one of those hours is worth trading. Therefore you should trade within the ideal window.
Since New Zealand and Singapore are located in the Asia-Pacific region, NZD and SGD will be particularly active from 23:00 GMT to 08:00 GMT. This time frame is when liquidity is at its highest and when bid-ask spreads are lower.
Brokers
Before investing and opening an account with a broker, you should check they offer the NZD/SGD. As an exotic, you might find this pair is not as widely available as majors. Also, the broker may not offer the same leverage on exotics.
Popular brokers like IG and Oanda offer the NZD/SGD. Other resources like TradingView, DailyFX and Yahoo Finance offer technical analysis, exchange rate history, forecasts, conversions and the best spot rates.
News
The latest market news and political events can impact the NZD v SGD exchange rate. There are many dedicated forex news sources that you can follow i.e. Bloomberg and Reuters. You can also practice NZD/SGD trading using fundamentals on a demo account.
History Of NZD
From 1840, the New Zealand pound was the country’s official currency. The New Zealand dollar was introduced in 1967. In 1993, the country issued its first official coins based on the British pound, shilling and pence system.
In 1964, the New Zealand Parliament passed the Decimal Currency Act, which shifted the NZ dollar to a decimal system and transitioned it to the current NZD. This also replaced the pound, shillings and pence with dollars and cents.
NZD was pegged to the USD at 1 NZD = 1.43 USD until 1985 when it was then pegged to a trade-weighted basket of currencies. Since then the New Zealand dollar has been a free-floating currency.
History Of SGD
In 1824, Singapore became a colony of the British Empire. It was then occupied by the Japanese during WWII. For two years in 1963, Singapore was under the federation of Malaysia. However, Singapore gained its independence in 1965. During this, it went through a series of using the Straits dollar, Malayan dollar, the Malaya and the British Borneo dollar.
The Singapore dollar was first circulated in 1967 and it was pegged to the British pound at 8.57 SGD = 1 GBP. Between 1973 and 1985, it was pegged to a hidden basket of foreign currencies. But since then, the Monetary Authority of Singapore has authorised the Singapore dollar as a free-floating currency.
Role Of NZD
The NZD is informally known as the ‘kiwi’, which is a flightless bird native to the country that appears on its $1 coin. As well as New Zealand, the NZD also circulates in the Tokelau, Pitcairn Islands, Niue, and the Cook Islands. The NZ dollar is regulated by the Reserve Bank of New Zealand and is in the top 10 most traded currencies in the forex market.
After the financial crash in 2008, the NZD was one of many high-yielding currencies that lost value, which is why it’s considered a carry trade currency. The country’s economy is greatly dependant on international trade, mainly with the EU, the US, Australia, China and Japan, and is considered a commodity currency. Its main exports include agricultural products like wool, meat and dairy products. Tourism is also important to New Zealand’s economy with the currency appreciating when it attracts holidaymakers.
Role Of SGD
The SGD is regulated by the Monetary Authority of Singapore, which serves as the country’s central bank and financial regulatory entity. The SGD is also a highly traded currency in the forex market, ranked 13th by volume in 2019.
The country is known as a fast-growing and developing Asian nation. For context, its GDP grew from 2.9% to 3.7% between 2015 and 2018. It is also considered one of the strongest and most stable currencies worldwide.
Singapore’s economy is highly dependant on exports such as consumer electronics, pharmaceuticals, petroleum and chemicals. The country is also widely recognised as a major financial services hub and attracts foreign investment due to its competitive tax rates, skilled workforce, and business-friendly culture.
Final Word On Trading NZD/SGD
Trading the NZD/SGD offers an opportunity to diversify your portfolio with an exotic pair. Traders should utilise live exchange rate charts, technical analysis and capitalise on the volumes seen during the most active trading window. It’s also worth keeping up with news events in the respective countries and opening an account with reliable brokers for day trading forex.
FAQ
Is the NZD going to get stronger against SGD?
The NZD exchange rate is affected by many factors, including its strength as a commodity currency and economic events. It’s important to check up-to-date news and live charts for forecasting.
What is the NZD and SGD exchange rate history?
You can find several resources online where you can view historical charts with NZD into SGD exchange rates. Understanding the historical trends behind the currency pair may help with future predictions.
What is the conversion rate of 1 NZD = SGD?
The NZD to SGD conversion rate is continuously moving. See the live price chart in our article for the rate today.
When should I trade the NZD/SGD pair?
Many strategies lend themselves to trading when the forex market sees the most volume, bringing with it tighter spreads and reduced costs. The ideal trading window is during the Asia Pacific session Monday to Friday from 23:00 GMT to 08:00 GMT the next day.
How do I start trading NZD/SGD?
To start forex trading NZD/SGD, you’ll need a broker that offers the currency pair along with excellent tools and favourable trading conditions. See our list of the best forex brokers.