It’s Not All Doom And Gloom With The Exchange Rate!

The Pound continued to move quite dramatically against the New Zealand Dollar last month, hitting a 2 year low before retracing slightly by the end of the month. The Dollar initially capitalised on a rate cut from the Bank of England and more uncertainty in the UK, and now all eyes will turn to this weeks announcement from the RBNZ, where they are more than likely to keep their rates on hold as the juggle persistent inflation against increasing signs of domestic and global weakness.

We saw a 13 cent movement throughout February, with a high of over $2.53 and a low around the $2.40 mark. That means since August, the rate has moved almost 57 cents, or $57,000 on £100,000! The increased interest rate expectations in neighbouring Australia spurred demand for carry trades, in which investors borrow in a low yielding currency and invest in higher yielding currencies such as the NZD, which pushed the rates to their lowest levels since December ’05. The rates did rally, however, and finished the month in the high 2.40’s at around $2.48, so better news for all of those moving their money across.

It is not all Doom and Gloom!

Granted, over the course of the last year the rates have dropped a considerable amount, but this has happened for a reason. The New Zealand economy is still very healthy and foreign investment is rife. On the contrary, the UK economy is suffering. The Bank of England has cut their rates to prevent a housing slowdown akin to that in the US, and it seems everything you read in the papers is bad news! This is one of the main reasons that so many of you are leaving the UK and seeking the fantastic opportunities that NZ offers for both yourselves and your children.

Would you have decided to move to New Zealand if the rates had always been $2.40? Most probably, yes. The problem a lot of people now face is coming to terms with these new levels, seeing as when they started the process last year the rates were a lot higher. These were somewhat distorted by the Sub Prime issues in the US, but again you must ask yourselves why it is that you are moving? If it is purely the rates of exchange then the South African Rand at over 15 ZAR to the Pound offers a very attractive return, but does it offer the same lifestyle and job opportunities that New Zealand does?

For those of you migrating in the next few months, however, you obviously want to maximise the amount of Dollars that you take over to start your new life, and there are different options for you to consider. The key is finding one which will best suit your situation; whether it is fixing a rate now for all of your funds, or adopting a hedging option to spread your risk a little by way of a market order or target rate. Some of you will be considering leaving your funds in the UK as you won’t need them immediately, but there is no guarantee the rates will improve. Another benefit of moving your funds across is that New Zealand’s interest rates are higher than they are in the UK, thus giving you a higher rate of return and complete peace of mind.

Whichever strategy you adopt, when you have moved your funds over, don’t look at the exchange rates again!! Save yourself the headache and sleepless nights – it can become a habit and take up a lot of your time!!

For a free, no obligation consultation about your situation and the options available please contact the migration team at HiFX on +44 (0) 1753 859159, or email _migration@hifx.co.uk.

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