FXStreet reports that тegative policy rate prospects should stem NZD strength but economists at HSBC don’t expect any large flow impact from a change in the rate sign. 

“Negative rate prospects should stem NZD strength, although it is less likely to see any large flow impact from a change in the policy rate sign. In fact, we find that foreign holdings of New Zealand government debt have actually increased by NZD3 B since May 2020, despite the build-up of negative rate expectations and the yield curve dropping back below peers.”

“The AUD and NZD are both exposed to similar external forces as ‘risk-on’ commodity-exporting currencies, meaning it is frequently only the direction of domestic monetary policy that differentiates the two. In other words, a divergent monetary policy outlook should see the NZD underperform the AUD.”