Exchange rate

The trade weighted index (TWI) measures the value of the New Zealand dollar (NZD) against New Zealand's major trading partners. It is the Reserve Bank's preferred summary measure for capturing the medium-term effect of exchange rate changes on the New Zealand economy and inflation. Data for the nominal TWI (17) is available from 1984.

Data for the graphs below is available in a spreadsheet containing all key graph data (XLSX <200KB).

NZ dollar exchange rate & trade-weighted index — monthly average

Key graph: exchange rate and trade-weighted index

The nominal TWI series is based on a consistent methodology weighting 17 trading partner currencies using goods and services trade data. The 17 currencies in the TWI basket account for around 85% of New Zealand’s foreign trade. Weights for the official nominal TWI are updated annually, although the historical weights for the nominal series are not revised if trade data are revised.

Data for the NZD/USD exchange rate and nominal TWI is available from 1984 in the key graph data file. Daily data is also published in the Exchange rates and TWI (B1) data table.

Real trade-weighted index

Key graph: nominal and real exchange rates

The real TWI is a weighted average of the New Zealand dollar with the currencies of New Zealand’s major trading partners, adjusted for relative inflation. The official real TWI published in the Exchange rates and TWI (B1) data table starts in 1984, however the analytical real TWI backdates the official real TWI to 1970.

Prior to 1984, the analytical real TWI is based on a basket of five currencies (Australian dollar, the US dollar, the Japanese yen, the UK pound and the euro) since official data for all 17 countries/currency regions in the official TWI are not available for the earlier period. The trade weights used to calculate the five-country weights have been obtained from old Stats NZ publications.

Official monthly consumer price index (CPI) data from 1970 is available for the US, UK and Japan, while the quarterly CPIs for Australia and New Zealand have been interpolated to monthly series. Historical “synthetic” NZD/EUR exchange rate and euro area CPI series have been produced, based on the NZD exchange rates and CPI series of the 11 countries that were included in the European currency union at its inception in January 1999, and weighted by the size of their economies expressed in terms of nominal GDP in US dollars.

These two synthetic series are also used in the official TWI series for the period 1984 to 1999. The weights for the real TWI from 1984 onwards are updated annually to incorporate revisions to trade data.

Data for the analytical real TWI is available from 1970 in the key graph data file.

More detail about the TWI methodology can be found in the Reserve Bank of New Zealand Bulletin article, Steenkamp, D (2014) “Measuring New Zealand's effective exchange rate”.