HSBC Global Research anticipates continued weakness for the New Zealand Dollar (NZD) against the US Dollar (USD) in the coming weeks, despite market expectations for further Reserve Bank of New Zealand (RBNZ) tightening over the next 12 months. The RBNZ is scheduled to meet on April 8, with consensus expecting the policy rate to remain unchanged at 2.25% [1]. Recent increases in oil and gas prices, attributed to Middle East conflict, have lifted local yields and led the yield curve to reflect additional expected RBNZ hikes. However, HSBC notes that unless the RBNZ delivers an unexpectedly hawkish outcome, NZD/USD is likely to stay under pressure [1]. New Zealand rates have risen relative to Australian rates, supporting NZD strength versus AUD, but not enough to offset broader USD strength [1].
Meanwhile, Brown Brothers Harriman’s (BBH) Elias Haddad reports that USD/JPY is trading just below 160.00 as the Bank of Japan (BoJ) releases new underlying CPI indicators. These indicators, including trimmed mean, weighted median, and mode inflation, remain below the BoJ’s 2% target but are converging toward it [2]. BBH economists expect the BoJ to deliver a 25 basis point rate hike to 1.00% at its April 28 meeting, with approximately two-thirds of this move already priced in by markets [2]. The positive output gap (0.45% in Q3 2025) and strong results from recent spring wage negotiations support the base case for gradual policy normalization [2]. The BoJ’s decision will also include the Outlook Report, providing further guidance on its policy trajectory [2].
Both central banks are approaching key April meetings with markets closely watching for policy signals. While the RBNZ is expected to hold rates steady, the possibility of further tightening is reflected in local yields, driven by external factors such as commodity prices [1]. In contrast, the BoJ is seen as moving toward gradual normalization, supported by improving inflation metrics and wage growth, with a rate hike largely anticipated by investors [2].
CONCLUSION
Markets are pricing in further tightening from both the RBNZ and BoJ, but the immediate outlook suggests continued NZD weakness unless the RBNZ surprises hawkishly, while the BoJ is expected to proceed with a gradual rate hike. The upcoming April meetings for both central banks will be pivotal in shaping currency movements and investor sentiment.