"I think New Zealand is being seen as a better choice of a bad bunch," says Peter Cavanaugh, the senior client advisor at Bancorp Treasury Services.
That view comes in the wake of poor data from Japan, China, Europe and Britain, on top of weak jobs figures from Australia on Thursday.
The latter has boosted market pricing to a 90 per cent chance of Australia's cash rate going from its current record low of 0.75 per cent to 0.5 per cent by May next year.
On Wednesday this week, RBNZ left its official cash rate unchanged at 1 per cent, surprising the market which had been pricing in an 80 per cent chance of a cut going into the announcement.
"The thought that our Reserve Bank isn't going to do much more with the cash rate means New Zealand is suddenly sticking out more from the pack," Cavanaugh says.
While the Australian market is pricing in a 60 per cent chance the expected cut will come as early as February, the New Zealand market is giving the chances of an RBNZ cut in February only a 35 per cent likelihood. That rises to a 65 per cent chance in the second half of next year.
Hopes that the United States and China will actually sign the first phase of a trade agreement soon continues to add a positive tone to global markets, especially after White House economic adviser Larry Kudlow said the two countries are coming down to the final stages and are in close contact.
"The mood music remains uplifting, but Trump remains undecided," Cavanaugh says.
According to Bloomberg, Kudlow told journalists that a deal was close. "We are coming down to the short strokes. We are in communication with them every single day right now."
China has resumed significant purchases of US farm exports and the two sides are discussing what it might take to remove existing tariffs.
The New Zealand dollar was trading at 49.59 British pence from 49.38, at 57.92 euro cents from 57.71, at 69.37 Japanese yen from 68.87, and at 4.4749 Chinese yuan from 4.4665. The trade-weighted index was at 70.64 from 70.46 points.
The two-year swap rate edged up to a bid price of 1.1650 per cent from 1.1629 per cent yesterday while 10-year swaps fell to 1.5175 per cent from 1.5350 per cent.
