NZ dollar weakens against Aussie as traders await business confidence survey

The kiwi was little changed at 84.15 US cents at 8am in Wellington from 84.13 cents at 5pm yesterday.

The New Zealand dollar weakened against the Australian dollar ahead of reports today which may show the Australian economy is picking up pace.

The kiwi slipped to 92.31 Australian cents at 8am in Wellington from 92.54 cents at 5pm yesterday. The local currency was little changed at 82.62 US cents from 82.75 cents yesterday as investors await the inaugural testimony of new Federal Reserve chairman Janet Yellen.

Australia's central bank this month changed its easing bias to neutral, signalling an end to rate cuts this cycle, following upbeat inflation and business confidence reports. Investors will be looking to Australian reports at 1:30pm New Zealand time today on home loans, house prices and business confidence for the latest gauge on Australian economic activity.

"Today, the key for the AUD will be the release of the NAB business survey," Kymberly Martin, markets strategist at Bank of New Zealand, said in a note. "If December's 2 year high on business conditions can be sustained, it may instil further confidence in the market that the RBA is indeed 'done' with its rate cutting process."

Traders are pricing in about 15 basis points of increases to Australian interest rates in the next year, according to the Overnight Swap Curve.

Speculative traders are heavily short the Australian dollar, meaning they bet the currency will fall, so a solid business survey is the biggest risk for the cross rate today, BNZ's Martin said.

Investors are looking ahead to tonight when Yellen makes her first appearance before US lawmakers as head of the Fed. Analysts are keen to hear her policy and economic views and expect she is likely to continue the Fed's plan to taper its US$65 billion a month quantitative easing programme by US$10 billion a month.

The New Zealand dollar fell to 84.41 yen from 84.73 yen yesterday. Japan has a bank holiday today in observance of National Foundation Day.

The kiwi dropped to 60.57 euro cents from 60.74 cents yesterday after a Sentix report showed Eurozone investor confidence unexpectedly improved in February to its highest in almost three years, as the current conditions reading turned positive for the first month since August 2011.

The local currency eased to 50.37 British pence from 50.43 pence yesterday. The trade-weighted index fell to 77.88 from 78.05 yesterday.