The New Zealand Dollar has been among the poorest performers in the G10 space this year. According to Rabobank’s Jane Foley, the kiwi ranks as the third weakest currency year to date, only ahead of the Canadian Dollar and the US Dollar, and the second weakest in the last six months, trailing only the Japanese Yen.
RBNZ easing stance and weak economy hurt NZD
Rabobank notes that the NZD’s underperformance reflects several key factors: the Reserve Bank of New Zealand’s bias toward monetary easing, ongoing domestic economic weakness, exposure to the sluggish Chinese economy, and the impact of the 15% US trade tariff introduced on August 1 under Trump’s policies.
Foley expects the kiwi could face further downside pressure in the short term, with NZD/USD potentially dipping toward 0.58 over the next one to three months. However, she sees scope for a recovery toward 0.61 on a 12-month horizon.
Focus on inflation data and RBNZ policy
Markets are watching New Zealand’s August food price inflation index closely for signals on consumer price trends. In July, food prices rose 0.7% month on month and 5.0% year on year, following a 1.2% monthly increase in June. Despite CPI inflation at 2.7% in Q2 remaining above the RBNZ’s 1–3% target band, policymakers have stressed that rates are likely to fall further given persistent economic headwinds.
USD positioning remains a key driver
While the kiwi has managed to outperform the US Dollar at times this year, Rabobank points out that this mainly reflects weakness in the greenback, not NZD strength. Speculative data show markets heavily short USD, and although further Fed easing is expected this week, many cuts are already priced in. This leaves room for a broad USD rebound in the weeks ahead.
In that context, the fragile New Zealand economy and dovish RBNZ outlook leave the NZD vulnerable, with risks tilted toward fresh dips toward the 0.58 level in the short term.
