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Value of the nzd against the usd

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Rebecca Smith, an analyst in the investment management division of a ?nancial services ?rm, is developing an earnings forecast for a small local dairy company in New Zealand (NZ). The company's revenues are closely linked to the price of global dairy commodity products, which are set by the global market and priced in US dollars (USD). All expenses of the company are incurred in the local market and denominated in NZ dollars (N ZD).

The strength of the NZ economy depends signi?cantly on sales of dairy commodity products denominated in USD. As a result, movements in world dairy commodity products in US dollar terms and the value of the NZD are strongly positively correlated. That is an increase in the USD price of dairy commodities is strongly correlated with an increase in the value of the NZD against the USD.

Reference no: EM133198234

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