Australian Dollar Faces Further Losses Against Kiwi on Rate Divergence, Analysts Say

The Australian dollar may extend its decline against the New Zealand dollar as investors unwind bearish bets on the kiwi following a hawkish shift from the Reserve Bank of New Zealand, according to strategists at Goldman Sachs and Barclays. The AUD/NZD pair fell 1.6% in May, its steepest monthly drop in more than a year, as the two central banks’ policy paths diverged sharply. Goldman strategists led by Kamakshya Trivedi wrote on May 31 that short AUD/NZD offers appealing risk-reward, citing a building case for a deeper correction. New Zealand policymakers signaled an openness to rate hikes as early as July, with RBNZ Assistant Governor Karen Silk keeping a 50-basis-point increase on the table. In contrast, the Reserve Bank of Australia paused tightening last month amid softening inflation and a weakening jobs market. Barclays analysts noted the RBNZ’s guidance triggered a short squeeze in the kiwi, particularly against the Aussie. With commodity futures data showing crowded long positions in the Australian currency near February highs and kiwi shorts still above pre-Iran conflict levels, further AUD/NZD weakness is likely as those positions unwind.