The New Zealand dollar is heading for a 2 percent weekly gain against its trans-Tasman counterpart after data showed the divergent neighbouring economies which will likely see interest rates move in New Zealand's favour.
The kiwi rose to an eight-year high 94.80 Australian cents this week, trading at 94.11 cents at 5pm in Wellington from 92.22 cents at the end of last week, and 94.45 cents yesterday. It fell to 82.99 US cents at 5pm from 83.44 cents at 8am and 83.29 cents yesterday.
New Zealand's economy is looking increasingly attractive to investors, with a survey this week showing business confidence at a 20-year high and house prices continuing to rise, while Australian jobs data surprised analysts with a drop in employment in December. Investors will watch New Zealand inflation figures next week to get a sense on how early central bank governor Graeme Wheeler will start hiking rates.
Traders are betting New Zealand's central bank will lift interest rates 118 basis points over the coming 12 months, while the Reserve Bank of Australia is expected to cut its key rate by 7 basis points over the same period, according to the Overnight Index Swap curve.
"The kiwi/Aussie cross could be under a little bit of risk if we get a benign CPI on Tuesday," said Martin Rudings, senior adviser at OMF in Wellington. "It's probably vulnerable for a bit of a correction."
