Kiwi May Defy Hedge-Fund Bears on Hawkish RBNZ, Analysts Say

New Zealand’s dollar may defy bearish hedge-fund positioning and rally in the near-term on a hawkish tilt from the central bank and any de-escalation in the Middle East, analysts say.

Short positions in the kiwi held by leveraged funds climbed to their highest since December 2019 in the week to May 5, according to Commodity Futures Trading Commission data. Yet the currency has not tracked those bets and may rise almost 2% from current levels if technical support holds, Westpac Banking Corp. said.

“NZD/USD is looking neutral-to-bullish at present,” said Imre Speizer , a strategist at Westpac. “Price action is not neatly following CFTC data” and any easing in the Iran conflict may broadly weaken the dollar, causing a short squeeze in the kiwi.

The disconnect between stretched bearish positioning and the kiwi’s resilience points to a rebound if key catalysts emerge. Traders are set to focus on inflation expectations data later this week and any hawkish signals from Reserve Bank Governor Anna Breman ’s speech that may help drive further gains.

Hedge funds have been negative on the currency this year as a soft domestic economy risks from the Iran war’s energy shock. Even so, the kiwi has climbed more than 3% against the dollar, making it the third-best performer among Group-of-10 peers .

The currency was 0.4% weaker at 59.43 US cents in Monday trading as President Donald Trump and Iran rejected each other’s latest peace proposals to end the conflict.

Kiwi can still as slip as traders digest the latest Iran news, but “we judge market participants consider the war will be over soon,” said Joseph Capurso , head of currency, international and geoeconomics research at Commonwealth Bank of Australia.

New Zealand’s currency may also find support if the RBNZ speech prompts markets to reassess the policy outlook, he added. “I think NZ dollar will have a good week, assuming Breman is hawkish.”