The foreign exchange regimes between New Zealand and Morocco Essay

The foreign exchange regimes between New Zealand and Morocco - Essay Example The researcher states that majority of the countries established their currency in antagonism to the USD, which in turn was redeemed into gold at an established rate. New Zealand joined IMF in 1961, maintaining a fixed exchange rate regime all through, making a couple of discretionary changes in the subsequent 25 post-war years. After a series of worldwide exchange rate realignments and currency crises in the late 1960s, a Smithsonian Agreement was established to ensure the stability of currencies known as the. This led to the creation of the Effective Rate in 1971, and a pegging to the U.S. Dollar replaced the currency's link to Pound Sterling. In 1973, the New Zealand Dollar was put on a controlled, floating basis, that is, the exchange rate is established from the value of the NZ Dollar, which is computed in regard to the fixed relationship between many currencies representing New Zealand's main trading partners and the Dollar itself. The strengths of these currencies are establis hed according to their proportionate share of country's total current overseas payments and receipts and are adjusted quarterly. A crawling-peg system of monthly depreciation was adopted from 1979 and was floated in 1985, as part of a broad-based financial markets’ deregulation. The supply and demand in foreign exchange market determined the rate and since the float, the Reserve Bank has not looked into the foreign exchange market. Under this system, the exchange rate adjusted against a trade-weighted basket. This adjustment came in small bits, sometimes daily, the main criterion for adjustment being the relative inflation to main trading partners. The average nominal movement in the currency for the duration of this regime was a depreciation of 0.5% monthly. In October 1993, the New Zealand dollar was weaker on a trade-weighted basis in comparison to the time of the float. In early November, the New Zealand Dollar was trading at 65 U.S. cents having appreciated by 6% in the previous year. Morocco has experienced a number of economic changes. Since France is their key trading partner, until the end of the Bretton-Woods system in 1973, Morocco had pegged its currency to the French Franc.