Tonga's pa'anga hits a 10-year low against Australian and NZ dollars [1]
Wednesday, April 11, 2007 - 17:50. Updated on Monday, July 20, 2015 - 12:23.
By Mary Fonua
Tonga's pa'anga hit a ten year low today against the currencies of its major trading partners Australia and New Zealand.
While it is bad news for importers who can expect higher prices and for Tongan consumers who will see the price of goods continuing to rise, it is, on the other hand, a good time for sending remittances from Australia and New Zealand to families in Tonga who will receive more pa'anga in exchange for the strong currencies.
A jump in the value of the Australian dollar overnight, taking the New Zealand dollar up with it, pushed the pa'anga to its lowest point in a continuing decline. This morning, according to the Westpac Bank of Tonga, $100 pa'anga would buy only AUD$58.71 or NZD$66.50.
The pa'anga has been steadily loosing value against these currencies this year.
Milestone low
Commenting on the milestone low, Paul Pelzer, General Manager Tonga, ANZ Bank, said that in the last fortnight since March 23 he had not seen a a big change in the value of the pa'anga. While the lowest point of the pa'anga was certainly a milestone to be noted, but he said it was not a big change on the recent rates.
"$100 pa'anga would buy $68 Kiwi dollars on March 23 and $67.72 Kiwi dollars today," he said. "The sad part is that it's a trend that is carrying through but, realistically, there is no major fluctuation. It is more a shift in currency."
Paul said while the pa'anga had weakened against the Australian and New Zealand dollars, the pa'anga had at the same time strengthened against the US dollar. He said that people are pulling out of the USD because of the US situation in the Middle East, but if the USD comes back up again, as it might be expected to do, then the Australian and New Zealand dollars will weaken again.
Trend
Meanwhile, a spokesperson for the Westpac Bank of Tonga said the trend they had been observing from the beginning of the year, might be expected to continue for the short to medium term, depending on how long it takes for the US dollar to rally and reverse the appreciation of the NZD and AUD against the USD and other currencies. The trend was affecting all Pacific Island countries.
"It's a good time to send remittances to Tonga, but it's not the best time to import from Australia and New Zealand," the spokesperson said.
Challenging times
Meanwhile, the Governor of the National Reserve Bank of Tonga, Joyce Mafi, said this evening that, "the Reserve Bank believes the level of the Tongan pa'anga is at an appropriate level given the current level of foreign exchange reserves and the volume of transactions between Tonga and its major trading partners including New Zealand and Australia."
She said that the fall in the Tongan pa'anga against the Australian dollar and the New Zealand dollar reflects the strengthening of the Australian dollar and the New Zealand dollar against the US dollar and other major currencies to a 10-year high.
She noted the advantage, "would be for receivers of foreign exchange from these countries such as remittances from Australia and New Zealand, exporters to New Zealand and Australia, tourism sector from tourist receipts from New Zealand and Australia, and foreign investors from these two countries."
However, she said the weakening of the Tongan pa'anga would be unfavourable for importers from New Zealand and Australia and those who make payments to these countries.
She said that the Reserve Bank aims to, "maintain exchange rate stability through the maintenance of an adequate level of foreign reserves, to maintain confidence in the exchange rate as this is crucial for macroeconomic stability during this challenging period.
"The Reserve Bank's objective is to maintain an adequate level of foreign exchange reserves of at least three to four months of imports. The maintenance of an adequate level of foreign exchange reserves promotes external stability and exchange rate stability. The external value of the Tongan pa'anga is determined on the basis of a weighted basket of currencies of its major trading partners," she said.
At this time, the NRBT is not considering introducing any restraints on the movement of currency out of Tonga.
The Reserve Bank Governor also stated that the weakening of the Tongan pa'anga against the Australian dollar and the New Zealand dollar would have a negative impact on inflation since New Zealand is Tonga's main source of imports. "However, imported inflation has fallen to 2.7% per annum in February 2007 compared to 4.2% per annum in February 2006," she said.