Could the GEL become the next NZD?

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The New Zealand Dollar is often considered as one of the most traded currencies in the world. In fact, statistics show that NZD is among the 10 most sold currencies and even more, according to a survey done by the Bank of International Settlements, it’s in tenth place and steadily remains its spot for ten years now. Although the pandemic and the global economic crisis as the result of the current situation put New Zealand’s economy under threat and obviously it isn’t getting as strong as before, FX traders still consider it a favorable currency and make a profit from it.

Reasons for NZD’s success

There are several reasons for the success of NZD trading. First of all, the country’s trading relationships and connections with other countries are one of the most important factors which actually determines the value of New Zealand’s Dollar. Moreover, experts usually take the country’s rate of import and export into account and the value of the currencies of New Zealand’s trading partners. 

For many years New Zealand’s economy has been flourishing and there have been many factors that played key roles in its success. First of all, the number of tourists in the country has always been outstanding. Adventure lovers adore planning trips to New Zealand’s beautiful nature. Travelers from all over the world enjoy its green mountains, wonderful seas, and picturesque resorts. There are so many historical tourist attractions in New Zealand which often catch the eye of the tourists and this is why tourism is developing at a fast pace in New Zealand. Strong tourism affects the country’s economy for good and traders often make good profit from it. 

Furthermore, New Zealand is one of the most peaceful countries in the world and has stable relations with its allies which is not a surprise as the country is an island and it’s hard to change and complain about its boundaries. Moreover, people in New Zealand are considered in general as kind, friendly, and ethical and people often talk about their wonderful work ethic which is contagious for other populations. All these things play a great role in flourishing New Zealand’s economy.

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Interestingly, people even made a special nickname for NZD and call it “kiwi” which expresses not only traders’ affection to the currency but also NZD’s simple opportunity to float like a kiwi. 

Yes, it may sound odd and weird but $1 actually represents kiwi, a small beautiful bird that is often associated with New Zealand and which moves easily and quickly just like NZD. One of the reasons for NZD’s success was it’s constantly changing rate which was way too attractive for forex traders. As  Irene Newman-Rogers, an expert from TopForexBrokers says “NZD is a kind of special currency. It’s not only its resemblance with kiwi the bird but what makes it special is that it is in fact free-floating but relatively stable at the same time”.

Possible battle with GEL

Not only is the NZD a free-floating currency but also nowadays financial experts notice the rapid movement of the Georgian currency which is called lari. Currently, GEL is considered as one of the most unstable currencies in the world, and its fast rate is strongly dependent on the insecure and unbalanced situation in the country. 

Georgia is a small country and even a tiny issue can turn into a big tragedy there. This is what is actually happening inside the country’s politics, economy, even education, and many other fields that worsen the general view of Georgia. Throughout the years the country faced the number of challenges that affected the exchange rate of the lari and made it unstable. One of the key factors has indeed been the Coronavirus outbreak. The pandemic seriously damaged Georgia’s economy which was actually flourishing as its tourism industry was one of the leading in the South Caucasus. But everything changed after spreading the virus, locking the borders, and the whole lockdown situation. 

In addition to this, international relations with the neighboring countries haven’t been advantageous enough. Georgia always struggles for returning its occupied territories which worsens its relations with Russia and other neighboring countries. General tension between the countries is visible and this was one of the reasons for the scandalous events of June 2019 in Tbilisi. Last year Russian MP Sergey Gavrilov took the seat of the parliamentary speaker which outraged part of the Georgian population as it was an unacceptable act for them. MP’s move caused a serious protest and riots which badly impacted Georgia’s economy. After the incident Vladimir Putin banned the flights in Georgia and put Georgia’s tourism in front of serious danger. Tourist attractions lost the visitors, the whole economy collapsed and the national currency, the lari depreciated its value. 

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Besides, elections are approaching and, predictably, the political situation in the country will probably escalate the conflict between the major party and the opposition. In general, rising political tensions are critical for the economy which is why GEL is going to continue moving up and down and why economic stability is really a hard goal for the country to reach. 

Despite the predictable mess in Georgia, it’s easy to notice similarities between the New Zealand Dollar and the Georgian lari. The same reasons caused ever-changing exchange rates and constant instability in both countries and none of them survived pandemic and political or economical difficulties. But the outcome is different.

Although NZD  is slowly losing its authority towards the forex traders, the lari can never replace it. “The reason is simple”, as Newman-Rogers says, “The volume of the lari doesn’t give the traders possibility to make a fortune by trading it. The Central Bank will never let this happen which is why the value of lari won’t ever be enough”. If we rely on common sense and also if she’s right, then we should suppose that GEL is not likely to become the new NZD.

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