NZ dollar drops to three-week low against Aussie

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 dropped to a three-week low against its trans-Tasman counterpart after Reserve Bank of Australia governor Glenn Stevens delivered an upbeat speech about prospects for the Australian economy and didn't try to "jawbone" the nation's currency lower.

The kiwi touched a low of 93.07 Australian cents this morning, and was trading at 93.10 cents at 8am in Wellington from 93.59 cents at 5pm yesterday. Australia's currency rose to a four-month high of 92.44 US cents overnight and the New Zealand dollar was pulled along with it, touching a week-high of 86.20 US cents overnight to trade at 85.95 cents at 8am, from 85.87 cents at 5pm yesterday.

The Australian dollar was the best performing major currency tracked by Reuters overnight after governor Stevens, speaking at an investor conference in Hong Kong last night, pointed to early signs the nation is in a transition from mining-led growth to domestic consumption. Stevens didn't repeat previous comments that the Aussie was overvalued.

"AUD continues to strengthen with optimism over rebalancing growth and a lack of 'jawboning' by RBA governor Stevens driving strength," ANZ Bank New Zealand strategist Carrick Lucas and senior FX strategist Sam Tuck said in a note. "Markets took the lack of 'jawboning' on the AUD as a green light to continue AUD appreciation. Also taken as a positive were the 'promising signs' on growth rebalancing away from mining investment."

The kiwi dollar will probably trade between 93 Australian cents and 93.70 cents today, ANZ said.

New Zealand Reserve Bank deputy governor Grant Spencer will speak to the investment conference on macro-prudential policy at 5:30pm New Zealand time tonight.

The release of New Zealand's trade balance for February, due at 10:45am, is unlikely to change the theme of New Zealand dollar strength today, ANZ said.

The kiwi reached a new four-month high of 62.49 euro cents overnight and was at 62.34 cents at 8am from 62.16 cents yesterday after European Central Bank officials signalled a softening of monetary policy earlier this week.

The local currency slipped to 51.85 British pence from 51.94 pence yesterday and weakened to 87.72 yen from 87.83 yen. The trade-weighted index was little changed at 80.18 from 80.16 yesterday.