The New Zealand Dollar (NZD) has not performed well in 2025. It is the third worse performing G10 currency in the year to date after the CAD and the USD and the second worst performer after the JPY in the half year to date, Rabobank's FX analyst Jane Foley reports.

RBNZ easing bias and weak economy weigh on kiwi

"The poor performance of the NZD this year reflects the easing bias of the RBNZ, New Zealand’s lengthy bout of economic weakness, its links with the weak Chinese economy and the larger than expected 15% Trump trade tariff imposed on the country on August 1. We see risk of short-covering pressure in favour of the USD on a 1-to-3-month view which could result in dips towards the NZD/USD0.58 area. That said, we see a move to the NZD/USD0.61 area on a 12-month view."

"Today’s release of New Zealand’s August food price inflation index will provide economists with a better insight as to whether CPI inflation is likely to remain above the RBNZ’s 1% to 3% target in the current quarter. In July food prices rose by 0.7% m/m (5.0% y/y) following a 1.2% m/m (4.6% y/y) boost in June. In Q2 CPI inflation registered 2.7% y/y. While this was a touch softer than expected, it is clearly well above the RBNZ’s 1% to 3% target. Despite the backdrop of sticky inflation pressures, the consensus view in the market is that RBNZ rates have further to fall – not least because policymakers have explicitly warned of more easing."

"While the NZD has outperformed the USD this year, this is mostly a function of the poor tone of the greenback. CFTC positioning data highlight that speculators’ have been short USD for months and, while further Fed easing is expected this week, there are a lot of Fed rate cuts already in the price of the greenback over the next 12 months or so. For this reason, we see scope for broad-based pullbacks in favour of the USD in the coming weeks. In view of the weak economic backdrop in New Zealand and the dovish tone of the RBNZ, this indicates there is risk for dips to the NZD/USD0.58 area on a 1-to-3-month view."