GBP/NZD below 2.00 for the first time

December 31, 2010 7am in Random Ramblings | Comments (3)

Yesterday I realised that the British Pound Sterling is worth less than 2 New Zealand Dollars for the first time in the history of the New Zealand Dollar.

Considering I’m saving very hard here in the UK and hoping to send the money back to NZ one day, this left me feeling a bit sick. The worst bit is that it reached record lows some months back, has been falling since then and is showing no signs of stopping.

Given the amount I save each month, every time the rate drops 0.05 (say, from 2.05 to 2.00), I have to save for an extra 2 months just to get back to where I was (in $NZ terms). Considering that the rate was 2.85 just over eighteen months ago, it feels a bit like all my saving over the last two years has been for nothing, and it’s only going to get worse.

I’m hoping that it’s largely due to the fact that the Bank of England base rate (bank lending rate that mortgages are based on) is also at its lowest point in the history of the Bank of England (300+ years). It’s currently at 0.5%, and it’s widely known that there’s only one way interest rates can go from here, and that’s up. Hopefully when that happens, the GBP/NZD rate will go up with it. Yes, working in a bank you learn boring stuff like that!

For those of you in NZ that look at the rate the other way, the NZD/GBP rate has gone above 0.50 for the first time ever.

3 Responses to “GBP/NZD below 2.00 for the first time”

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  1. Comment by Katrina — January 4, 2011 6am  

    This makes me consider investing in pounds and capitalising on your promised rise. Perhaps you can keep me informed of what British interest rates are doing?

  2. Comment by matt — January 4, 2011 11am  

    I thought exactly this initially, but then decided it was just far too risky. Every time the pound drops further my heart sinks, and I’ve realised I’m not a “risky investment” sort of guy.

    And of course, nowhere do I *promise* that interest rates will rise, nor that an interest rate rise will result in a strengthened Sterling :-D

    Even if it does happen, I wouldn’t be surprised if such a recovery took 10 years, and if that happens, you’d be better off putting your money in a bog-standard NZ savings account for those 10 years. That’s if such a recovery of the currency ever happens – this is a historic low for the pound.

    John Key may have made a lot of money trading currencies, but I bet he also had a lot of professional training!

  3. Comment by matt — January 4, 2011 1pm  

    Wow, this morning it was 1.996. Now, five hours later, it’s 2.041. That’s quite a rise in 5 hours (about 2.3% if I’m not mistaken). No wonder huge money can be made or lost on currency dealing.

    I wonder if the psychological effect of the currency being at 1.9999 triggered a mass buy of GBP which pushed it up sharply this morning on the markets’ first trading day of the new year?

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