New Zealand Dollar: "Bullish NZD Dreams on Hold"

Image © Riksbank

Kiwi at a crossroads as policy signals clash.

The New Zealand dollar has slipped down 2026's currency leaderboard and is marked down as one of the underperformers in the G10 complex over the past week.

The currency's recent weakness is largely attributed to the cautious tone struck by the Reserve Bank of New Zealand under the new leadership of Anna Breman.

“The NZD has been one of the bigger underperformers among G10 FX, dropping back below the 60 handle versus USD. In stark contrast to the RBA, the RBNZ last week showed little impetus to tighten quickly, in the presence of a negative output gap and recent currency strength. In this sense, new Governor Breman was true to its dovish reputation,” the bank says.

That reading suggests markets may have run ahead of themselves in pricing near-term tightening, especially when compared with the more assertive stance seen from the Reserve Bank of Australia.

“The Anna Breman era started in New Zealand last night and it looks like the market got ahead of itself on kiwi rate hikes. While the statement and presser were not exactly raging dovish, the new governor of the RBNZ offered nary a crumb for the hawks. Bullish NZD dreams are on hold, yet again," says Brent Donnelly, analyst at Spectra Markets.

The implication is that immediate upside momentum may be limited if investors recalibrate expectations for the timing and pace of hikes.

However, the longer-term narrative remains constructive; strategists at UBS Global Wealth Management see a strengthening profile emerging over 2026.

"We anticipate that the New Zealand dollar will gradually strengthen against the USD throughout 2026, supported by early rate hikes amid a building economic recovery and persistent inflationary pressures," say Wayne Gordon and Teck Leng Tan.

🎯 GBP/NZD year-ahead forecast: Consensus targets from our survey of over 30 investment bank projections. Request your copy.

JP Morgan argues that a turning point in the economic cycle is undeniable.

The bank describes late 2025 as an inflexion point for the business and policy cycles, noting that the RBNZ pivoted in November, regulatory constraints have eased and activity data have begun to outpace official forecasts. A hiking cycle is now priced for the second half of 2026, and survey data point to one of the largest growth accelerations in G10 from 2025 to 2026.

On that view, NZD is beginning to repair what JP Morgan describes as a discount to fair value, particularly relative to business confidence metrics that are at multi-decade highs.

The tension for markets is therefore one of timing rather than direction.

Near term, the RBNZ’s reluctance to validate aggressive tightening expectations leaves the kiwi vulnerable to consolidation or further softness.

Further out, improving domestic momentum and a shift in the policy cycle could provide the foundation for a more durable recovery.