File image. Governor Christian Hawkesby. Source: RBNZ, Pound Sterling Live.
The New Zealand Dollar is underperforming again.
NZD is in the red against the majority of its peers after the Reserve Bank of New Zealand (RBNZ) reiterated a committment to deliver two more interest rate cuts this cycle.
"NZD/USD edged lower to near 0.5940. RBNZ Governor Hawkesby reiterated that the bank forecasts the Official Cash Rate (OCR) to fall by another 0.5% to 2.5% by year‑end," says Samara Hammoud, an analyst at Commonwealth Bank of Australia.
Although Hawkesby added that the pace of further interest rate cuts will depend on incoming data and the speed of New Zealand's economic recovery, he made it clear he thinks the stale economy will facilitate the move.
The RBNZ estimates the economy contracted in the second quarter of 2025, but expects growth to resume in the second half of 2025 as household expenditure rises.
Further rate cuts at the RBNZ will likely weigh on the NZ Dollar going forward, particularly against currencies belonging to central banks that are less inclined to cut interest rates from here.
"RBNZ's dovish pivot deals a blow to NZD," says Jason Wong, FX strategist at BNZ, the New Zealand Bank. He explains the Reserve Bank of New Zealand's "dovish pivot" has driven domestic bond yields lower, contributing to the NZD's "laggard" status.
The 'dovish pivot' references the RBNZ's last policy decision, where it cut the Official Cash Rate (OCR) by 25 basis points to 3.0%, but two members of the board dissented from their four colleagues to vote for a larger 50bp cut.
This was the first such vote split in RBNZ history, and signals a clear belief by decision makers that more work must be done to get interest rates lower in order to support the economy.
The decision is a prime driver behind ongoing NZD underperformance, with the currency being the third-biggest loser of 2025, following behind the tariff-implicated U.S. and Canadian dollars.
"While the quarter point cut was no surprise, the catalyst for the move lower in NZD was the debate among the board members between a 25bp and 50bp cut, with two members voting for a 50bp cut. Acting Governor Christian Hawkesby mentioned that the sell-off in the NZD was anticipated and the central bank was comfortable with it," says a note from HSBC.