TD Securities’ FX strategist Howard Du maintains a bearish New Zealand Dollar (NZD) bias, noting that Reserve Bank of New Zealand (RBNZ) tightening is largely priced and NZD positioning has normalized. They expect AUD/NZD to remain supported above 1.20 with a 1.22 year-end forecast, and see a high bar for NZD/USD to sustain gains above 0.60 despite broader US Dollar (USD) weakness.

AUD/NZD supported as NZD stays pressured

“We hold bearish NZD bias and stick with 1.22 as our AUD/NZD year-end forecast.”

“Since the hawkish July RBNZ rate hike, FX market has sharply pared back its short NZD positioning vs both the USD and AUD. NZ data releases since then have not provided enough evidence for market pricing to deviate from the RBNZ’s latest OCR guidance. As a result, consensus continues to expect another RBNZ rate hike at the upcoming meeting.”

“Cumulative RBNZ rate hike pricing in the market for rest of 2026 now appears to be elevated vs rest of the world. The NZ Q2 non-tradable CPI was more muted than headline, suggesting risk may be skewed toward NZ inflation also converging lower toward RoW in the coming months, alleviating some rate hike pressure for the RBNZ.”

“Our base case is for AUD/NZD to stay supported above 1.20 in the coming months (2026 year-end forecast is at 1.22). As for NZD/USD, we believe the bar for NZD/USD to rally above 0.60 remains high, despite the broad-based bearish USD momentum in market.”