The Dollar’s Descent and the Rising Tide of Alternative Assets: What NZ Investors Need to Know
Gold is hitting record highs – surpassing US$4515/oz – and it’s not alone. Silver, platinum, even industrial metals like aluminum and copper are surging. But this isn’t simply a ‘safe haven’ rally. The underlying driver is a fundamental shift in global currency dynamics, specifically the weakening US dollar, and the implications for New Zealand investors are significant.
The Greenback’s Decline: A Year in Review
The US dollar has been steadily losing ground throughout 2025, depreciating by over 10% overall. Against the Chinese yuan, the decline is around 5%, while the euro and Australian dollar have gained roughly 13% and 12.5% respectively against the dollar. Interestingly, the dollar’s fall against the New Zealand dollar has been comparatively muted at -3.3%, a fact that speaks more to the current challenges facing the New Zealand economy than to any inherent strength in the US currency. Even the Japanese yen, often considered a weaker currency, has largely held its value against the dollar.
US Economic Signals: A Mixed Bag
Recent US economic data paints a nuanced picture. While holiday shopping appears robust, initial jobless claims rose to 264,000 last week, exceeding expectations. Mortgage applications have also slipped, despite stable interest rates. This suggests a potential cooling in certain sectors, despite consumer spending holding up. The US labor market, while still relatively strong, is showing signs of softening, a trend worth monitoring closely.
Asia’s Diverging Fortunes
Across the Pacific, economic trends are more varied. Japan’s industrial production declined in November, hampered by weakness in the automotive and technology sectors. However, machinery production offered a bright spot. In stark contrast, Taiwan experienced a substantial surge in industrial output, rising 16.4% year-on-year. China continues to navigate economic headwinds, with an investigation underway to protect domestic beef producers and ongoing concerns surrounding property developer China Vanke, despite temporary reprieves from bond defaults. Singapore’s industrial production, while correcting from a previous surge, remains significantly higher than last year’s levels.
Commodity Markets and the USD Connection
The weakening dollar is a key factor driving the rally in commodity prices. As the dollar loses purchasing power, commodities – often priced in USD – become more attractive to international buyers. This is particularly evident in the precious metals market, but extends to industrial metals like aluminum and copper, even amidst concerns about demand in China. Furthermore, the rising price of uranium, up 15% this year, reflects growing demand fueled by the expansion of AI data centers and the subsequent need for increased electricity generation, potentially through nuclear power. The World Nuclear Association provides further insights into the evolving nuclear energy landscape.
Currency Impacts for New Zealand
The Kiwi dollar has edged down slightly against the US dollar, currently trading at just under 58.3 US cents. However, it has also weakened against the Australian dollar, trading at 86.9 Australian cents. The Trade Weighted Index (TWI-5) reflects this overall downward trend, currently at 62.3. For New Zealand businesses and investors, this currency environment presents both challenges and opportunities. Exports to countries with strengthening currencies (like those in the Eurozone and Australia) may become more competitive, while imports from the US become more expensive.
Bitcoin’s Resilience Amidst Global Shifts
Despite a slight dip to US$87,286, Bitcoin continues to demonstrate relative stability, with modest volatility. Its performance suggests a growing acceptance as a potential store of value, particularly in a world questioning the dominance of traditional fiat currencies. However, the cryptocurrency market remains inherently volatile and requires careful consideration.
Looking Ahead: Navigating a Changing Landscape
The trends observed over the holiday period suggest a continued weakening of the US dollar and a potential shift towards a multi-polar currency world. This environment favors diversification, with increased allocation to assets denominated in currencies other than the US dollar, as well as commodities and potentially alternative investments like precious metals. New Zealand investors should carefully assess their portfolios and consider strategies to mitigate the risks associated with a declining dollar and capitalize on the opportunities presented by a changing global economic order. What adjustments will you make to your portfolio to navigate these shifting tides?
