This question came up when I wrote about BOZ constants in Doctor Fortran in “We’re All BOZos on This Bus” - Doctor Fortran (stevelionel.com) I didn’t know the answer at the time.
What I was told later was that it had to do with a choice of FORMAT edit descriptor for hexadecimal output. X was already taken, so Z was used. This predated MIL-STD-1753, which largely “standardized” existing practice. IBM had been using Z prior to F77 standardization. I know that VAX FORTRAN 1.0 (1978) supported both X and Z as letters for hex constants.