MUFG Research sees NZD gains likely limited in the near-term.
"Like all G10 currencies, NZD advanced versus the US dollar in July with a broadbased USD sell-off reflecting numerous factors like concerns over US growth due to the renewed spread of COVID and the expectations of continued aggressive monetary easing from the Federal Reserve. But we are cautious over the possibility for NZD to continue advancing," MUFG notes.
"The RBNZ has expressed some reservations over NZD strength and this could encourage the RBNZ to implement additional monetary easing ahead...Additional QE or a more active policy of intervention are possibilities and the prospect of negative rates being adopted later in the year will remain. The RBNZ NZD TWI has gained further and is now at levels higher than when COVID hit and further gains to the upside would imply a break of the downtrend that has been in place since 2017. Given the prospect of the RBNZ resisting further NZD strength we see gains ahead moderating," MUFG adds.