New Zealand Dollar Propelled Higher by Positioning Reversal

Image © Adobe Images

A huge cull of NZD shorts is helping the currency rise.

The New Zealand dollar is neck-to-neck with the Aussie dollar as 2026's best-performing currency.

The year is still young, but a savage unwind of 'shorts' appears to be a significant driver of the Kiwi's advance.

"Positioning has been the likely largest influence on the currencies," says David Forrester, Senior FX Strategist at Crédit Agricole, when discussing AUD and NZD outperformance in a recent note.

Crédit Agricole's positioning indicator shows the NZD came into the week as the largest short in the G10. "Indeed, the NZD has been one of the standout performers," says Forrester.

When positioning becomes one-sided, many participants hold the same trade. This can result in stop-loss orders clustering around similar levels, and small price moves can trigger forced exits.

Liquidity dries up just when everyone wants to do the same thing.

This is why currencies often reverse sharply without any obvious new fundamental catalyst.

RBC: "Positioning data shows notable unwinding in short NZD"

Analysis from RBC Capital Markets says the move can run a great deal further. He says traders are unwinding short NZD positions where the consensus 'sell' trade reached extreme levels.

"At the extremes, positioning matters," says Richard Cochinos, FX Strategist at RBC Capital. "This is most obvious in NZD currently."

RBC's studies show positioning in NZD futures is "very short" and it's the shortest across all assets.

"In 2019 when these shorts unwound NZD appreciated 8%," he points out. "In the 2025 short unwind the NZD appreciated 9.4%."