Reserve Bank of New Zealand re-weights TWI

Updated TWI Weights | Explanation

20 December 2000

In January 1999, the Reserve Bank revised the method used to calculate the Trade-Weighted Index (TWI) measure of the New Zealand dollar, and also announced plans to re-weight the TWI annually. Accordingly, the Reserve Bank of New Zealand has revised the TWI weights as of today, Wednesday, 20 December 2000.

Updated TWI Weights

Explanation

As described in our information release of 21 December 1998:
The TWI is based on the value of the New Zealand dollar (NZD) against the Australian, US, Japanese, UK and euro area currencies.
The TWI is 50:50 weighted according to:

• currency area's share of New Zealand's merchandise trade (exports plus imports), normalised to total 100 percent; and
• currency area's share of the combined nominal GDP of those 5 currency areas.

The RBNZ releases the TWI daily, using the exchange rates prevailing in the market at 11.10am. The 11.10am calculation today utilises the new weights and new scaling (IND) factor detailed above.
The scaling (IND) factor is calculated to prevent spurious shifts in the TWI that could otherwise occur as a result of the re-weighting. By convention, the rescaling is done using the exchange rates prevailing at 11.10am on the day before the new weights are released, ie 11.10am on 19 December. The new IND factor is set so that the TWI with the old weights is equal to the TWI with the new weights at that point in time.
The weights have been calculated on the basis of calendar year 1999 data.
Merchandise trade data is sourced from Statistics New Zealand.
Nominal GDP for each currency area is sourced from International Financial Statistics (IFS), published by the International Monetary Fund.
GDP shares are calculated using GDP measured in local currency units, converted into US dollars (using period average exchange rates from IFS).

On the basis of the exchange rates prevailing at 11.10am on 19 December 2000, the TWI (with the old weights) had a value of 49.86. To set the TWI (with the new weights) at 11.00am on 19 December equal to this level, the new scaling factor is 56.5930.

The TWI formula and other information is available from our information release of 21 December 1998. Please contact Christopher Smith on (04) 471-3657 if there are any inquiries relating to this message.