(Bloomberg) -- Hedge funds have swung to a bearish position on the New Zealand dollar for the first time in a year amid growing expectations the central bank will keep rapidly cutting interest rates.
Leveraged funds flipped to a net-short position on the currency in the week through Nov. 26 after holding long positions in each week since December 2023, Commodity Futures Trading Commission data show. At the same time, institutional asset managers boosted their short bets on the kiwi to the most since July.
The tilt toward a more negative view comes as economists bring forward expectations for Reserve Bank of New Zealand policy easing. The central bank will make a third straight 50 basis-point cut at its February meeting, according to a Bloomberg survey published Tuesday. A third large reduction may be delivered early next year if economic projections pan out, RBNZ Governor Adrian Orr said last week.
New Zealand’s dollar is the worst-performing Group-of-10 currency this quarter after Sweden’s krona, sliding more than 7%, as the RBNZ cuts rates to help revive a struggling economy. The kiwi is also facing pressure from a resurgent greenback as traders wind back bets on Federal Reserve rate cuts amid a robust US economy and President-elect Donald Trump’s fiscal policies.
The kiwi may weaken toward 57 cents in the March quarter as Trump’s potential tariff increases weigh on the currency “even if New Zealand’s exports to the US are not directly impacted,” Commonwealth Bank of Australia strategists led by Joseph Capurso wrote in a note to clients Tuesday. “We expect interest-rate differentials to also remain a headwind.”
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