The New Zealand dollar is lagging behind other major currencies and might fall further, according to analysts at BBH FX. They expect the Reserve Bank of New Zealand (RBNZ) to cut the policy rate by 25 basis points to 2.75%. There’s a 45% chance the cut could be larger, at 50 basis points down to 2.50%, as suggested by the swaps market. New Zealand’s economy faced a sharper downturn in Q2 GDP, giving the RBNZ room to implement rate cuts. In August, the RBNZ mentioned it could lower the Official Cash Rate (OCR) further and projected another 25 basis point cut by December, and possibly another in the first half of 2026, which could bring the rate down to 2.50%. The next meeting will not include a Monetary Policy Statement, with the following one set for 26 November.

Insights from Experts

The FXStreet Insights Team, made up of experienced journalists, shares market observations from specialists and insights from various analysts. Their reports include commercial notes and expert analysis to clarify market trends. With a strong likelihood of a rate cut from the RBNZ tonight, continued downward pressure on the NZD is expected. The market anticipates a 25 basis point cut, but a 50 basis point cut is also a possibility. This expectation drives traders to position against the kiwi dollar in the short term. This view aligns with recent soft economic data from New Zealand. The weak Q2 GDP figures are compounded by low Q3 inflation numbers from September 2025, which stood at just 2.9%, below the RBNZ’s target range. Weak domestic demand gives the central bank a strong reason to ease monetary policy further to boost the economy. External factors like commodity prices are also hurting the currency. The latest Global Dairy Trade auction revealed a significant 4.2% drop in whole milk powder prices, a key export for New Zealand. This decline increases pressure on the NZD’s value against its trading partners.

Policy Divergence and Financial Strategies

We are observing a growing gap between the RBNZ’s policies and those of other central banks, especially the U.S. Federal Reserve. After its September 2025 meeting, the Fed maintained its hawkish stance, keeping interest rates steady with no cuts anticipated. This difference in interest rates makes US dollars more appealing compared to the lower-yielding kiwi. For those trading derivatives, buying NZD put options with expirations after the next Monetary Policy Statement on November 26 could be a smart move. This strategy can help take advantage of a potential drop while limiting losses if the RBNZ is less aggressive than expected. With high volatility expected, options offer a useful way to manage uncertainty. Alternatively, selling NZD/USD futures contracts provides a more straightforward method to short the currency. We witnessed a similar situation during the 2015 RBNZ easing cycle, where multiple rate cuts resulted in a sustained decline in the kiwi dollar over several months. This historical trend supports taking short positions now in preparation for a similar outcome. Create your live VT Markets account and start trading now.

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