NZD Shorts Face High Bar for Further Losses

The New Zealand Dollar (NZD) faces a high bar for further losses due to extreme short positioning, according to MUFG's Derek Halpenny.

The Reserve Bank of New Zealand (RBNZ) is expected to tighten monetary policy significantly over the next year, with nearly 100bps of tightening priced in. However, softer labour-market conditions may cast doubt on this expectation, potentially limiting NZD downside.

The weekly IMM positioning data shows that Leveraged Funds' total short position in NZD has hit a record high since 2006, suggesting bearish positioning may already be extreme.