Westpac Fiji’s senior economist, Shamal Chand, noted that the past few months have been significant for the foreign exchange market, with fluctuations in Fiji’s counterpart currencies due to interest rate reductions by the European Central Bank, the Reserve Bank of New Zealand, and the US Federal Reserve.
Chand highlighted that the global foreign exchange market is receiving mixed signals. While diminishing inflation in developed economies supports the argument for easing monetary policy, robust growth, particularly in the US, raises concerns that central banks may be acting too hastily. There are additional worries about a possible recession if central banks in developed nations keep interest rates high for prolonged periods.
Despite these global developments, the Fijian dollar remains relatively stable against its major counterparts, although it has relinquished most of its gains against the USD since 2021. In the latest Westpac Fiji quarterly economic update, Chand mentioned that the nominal effective exchange rate (NEER) has stabilized within the range of 82.85 to 86.82 since 2010, though it did drop from 85.6 in May 2024 to 82.9 in July 2024, indicating a possible adjustment in the currency weights by the Reserve Bank of Fiji.
The real effective exchange rate (REER) has also decreased from 108 in 2019 to the current 93.5 due to the Fijian dollar’s depreciation against the USD, which has, in turn, improved Fiji’s trade competitiveness.
Looking ahead, Chand projected that based on current global economic trends and anticipated decisions by central banks, the Fiji-US dollar exchange rate is expected to rise from 0.4457 to 0.46 by December 2025. Meanwhile, the FJD/AUD is forecasted to decline from 0.6596 to 0.64, and the FJD/NZD is anticipated to increase from 0.7279 to 0.73 during the same timeframe.
These projections are in line with Westpac Economics’ October outlook, which anticipates further interest rate cuts by the US Federal Reserve and the Reserve Bank of New Zealand in their upcoming meetings, while the Reserve Bank of Fiji is expected to maintain steady rates until next year.