Bank of America Recommends Selling AUD/NZD on Monetary Policy Divergence

Bank of America is recommending a short position on the Australian dollar versus the New Zealand dollar (AUD/NZD), forecasting that a widening gap between the two countries' central bank policies will create significant headwinds for the currency pair.

Central Bank Policies Diverge

The core of the firm's thesis rests on differing monetary policy paths. In a recent note, Bank of America strategists highlighted their economists' expectations for the two central banks:

• Reserve Bank of Australia (RBA): Forecast to leave interest rates unchanged until the second half of 2027.
• Reserve Bank of New Zealand (RBNZ): Expected to raise rates twice more in 2026.

This divergence, where one central bank tightens policy while the other remains on hold, typically strengthens the currency of the hiking bank. BofA noted that the New Zealand dollar remains "under-owned" and is positioned to benefit from this trend.

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Structural Headwinds and Positioning

Beyond central bank actions, Bank of America identified structural factors that could further weigh on AUD/NZD. The firm pointed to migration dynamics, noting that widening tax-rate differentials between Australia and New Zealand could reverse recent migration flows, acting as a medium-term headwind for the pair. This view was first detailed in a note from May 27, 2026.

The current recommendation builds on a previous call from July 29, 2026, when the firm advised selling AUD/NZD via put spreads. While the Australian dollar's sensitivity to agricultural commodity prices is a known factor, analysts view the policy and migration issues as additional pressures on the cross.