WESTPAC Fiji senior economist Shamal Chand said the past few months have been eventful for the foreign exchange market, with Fiji’s counterpart currencies experiencing volatility due to rate cuts by the European Central Bank, Reserve Bank of New Zealand (RBNZ), and the US Federal Reserve.
He said the global foreign exchange market was facing mixed signals – receding inflation in developed economies supports arguments for monetary policy easing, while sound growth, particularly from a resilient US economy, suggests central banks might be acting prematurely.
He said there were also concerns about a potential recession if central banks in developed countries maintain elevated rates for too long.
“Amid these global developments, the Fijian dollar has held relatively well against its main peers, although it has lost most of its gains against the USD since 2021,” Mr Chand said in the Westpac Fiji quarterly economic update this week.
“Broadly, the nominal effective exchange rate (NEER) has remained relatively stable within the 82.85 to 86.82 range since 2010. NEER did fall from 85.6 in May 2024 to 82.9 in July 2024, suggesting the RBF had revised its currency weights in its basket.
“The real effective exchange rate (REER) also fell from 108 in 2019 to the current 93.5 due to the weakening of the FJD against the USD, which has somewhat enhanced Fiji’s trade competitiveness.”
Mr Chand said looking ahead, based on current global economic trends and anticipated rate decisions by central banks of Fiji dollar pairs, the Fiji/ US dollars is expected to rise from 0.4457 to 0.46 by December 2025.
“The FJD/AUD is projected to decline steadily from 0.6596 to 0.64, while the FJD/NZD is anticipated to rise from 0.7279 to 0.73 over the same period.
“These projections align with Westpac Economics’ October outlook, which assumes further rate cuts by the US Fed and RBNZ in their next meetings, while the RBF is expected to hold rates steady until next year.”
