The New Zealand dollar may extend this year's 10 per cent gain against the Australian dollar should Reserve Bank of Australia governor Glenn Stevens today affirm that a slowing economy justifies further interest rate cuts.
The kiwi recently traded at 87.20 Australian cents, little changed from 87.27 cents at the 5pm market close in Wellington yesterday. The local currency weakened to 80.31 US cents, from 80.78 cents yesterday.
The New Zealand dollar has surged against its Australian counterpart this year, hitting a four-and-a-half year high of 87.74 cents last week, as traders expect governor Stevens to continue cutting interest rates to spur the economy as mining slows. Meanwhile in New Zealand, a reviving local economy is expected to push interest rates up.
"I wouldn't be surprised at all if he endorses the current market pricing," said Sam Tuck, senior manager FX at ANZ New Zealand. "Kiwi/Aussie might be supported higher."
Should the New Zealand dollar appreciate further against the Aussie, it would be an opportunity to buy Australian dollars as divergent interest rate paths are already priced in, said Tuck.