WESTPAC Fiji senior economist Shamal Chand noted that recent months have seen significant activity in the foreign exchange market, with fluctuations in Fiji’s counterpart currencies attributed to interest rate reductions by the European Central Bank, the Reserve Bank of New Zealand (RBNZ), and the US Federal Reserve.
He explained that the global foreign exchange landscape is sending mixed signals; decreasing inflation in developed nations suggests a possibility for easing monetary policies, whereas robust growth, especially from the US economy, indicates that central banks may be acting too hastily. There are also worries regarding a potential recession if central banks in developed economies keep interest rates elevated for an extended period.
Despite these global trends, Mr. Chand observed that the Fijian dollar has remained relatively resilient against major currencies, although it has forfeited most of its gains against the USD since 2021. In the recent Westpac Fiji quarterly economic update, he mentioned that the nominal effective exchange rate (NEER) has remained stable within the range of 82.85 to 86.82 since 2010. However, it did drop from 85.6 in May 2024 to 82.9 in July 2024, indicating that the Reserve Bank of Fiji may have adjusted its currency weights in its basket.
Furthermore, the real effective exchange rate (REER) has decreased from 108 in 2019 to the current 93.5 due to the Fijian dollar’s decline against the USD, which has somewhat improved Fiji’s trade competitiveness.
Looking forward, based on prevailing global economic trends and expected rate decisions from central banks affecting the Fijian dollar, Mr. Chand anticipates that the Fiji/US dollar exchange rate will climb from 0.4457 to 0.46 by December 2025. The FJD/AUD is expected to gradually decrease from 0.6596 to 0.64, while the FJD/NZD is projected to increase from 0.7279 to 0.73 during the same timeframe.
These projections align with Westpac Economics’ October outlook, which anticipates further rate reductions by the US Federal Reserve and RBNZ in their upcoming meetings, while the Reserve Bank of Fiji is expected to maintain steady rates until next year.