NZD Vulnerable to Downward Correction as Dovish Policy Shift Looms

Foreign investors continued to dominate New Zealand's government bond market in July 2026, holding 58.9% of the stock, up from 57.7% in June.

The non-resident holdings rose to NZ$122.47 billion from NZ$115.53 billion, while non-resident repo holdings eased to NZ$11.02 billion from NZ$11.09 billion.

This surge in foreign demand is seen as a sign of firm external interest in local duration bonds, even as markets remain sensitive to shifts in policy expectations.

Meanwhile, the New Zealand dollar is trading slightly above its rolling 12-month average, with market expectations pricing two additional Reserve Bank of New Zealand hikes by year-end.