Westpac Fiji’s senior economist, Shamal Chand, has highlighted recent fluctuations in the foreign exchange market, attributing the volatility of Fiji’s counterpart currencies to interest rate reductions implemented by the European Central Bank, the Reserve Bank of New Zealand, and the US Federal Reserve over the past few months.
Chand noted that the global foreign exchange market is sending mixed signals: while decreasing inflation in developed nations indicates the possibility of easing monetary policies, robust economic growth, particularly from the US, raises concerns that central banks may be acting too hastily. He also expressed worries about a possible recession if central banks in developed countries maintain high interest rates for an extended period.
In the Westpac Fiji quarterly economic update, he stated that the Fijian dollar has remained relatively stable against its main competitors, although it has lost much of its value against the US dollar since 2021. The nominal effective exchange rate (NEER) has generally stayed within a stable range of 82.85 to 86.82 since 2010, although it did decrease from 85.6 in May 2024 to 82.9 in July 2024, indicating a possible adjustment in the Reserve Bank of Fiji’s currency weightings.
Furthermore, the real effective exchange rate (REER) has dropped from 108 in 2019 to the current level of 93.5 due to the Fijian dollar’s depreciation against the US dollar, which has somewhat improved Fiji’s trade competitiveness.
Looking ahead, Chand anticipates that the Fiji dollar will rise against the US dollar from 0.4457 to 0.46 by December 2025. The forecast predicts a gradual decline of the FJD/AUD from 0.6596 to 0.64, while the FJD/NZD is expected to rise from 0.7279 to 0.73 during the same period.
These projections are in line with Westpac Economics’ October outlook, which foresees further rate reductions by the US Federal Reserve and the Reserve Bank of New Zealand in upcoming meetings, while the Reserve Bank of Fiji is predicted to maintain steady rates until next year.