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NZ dollar gains vs. Australian dollar on divergent central banks

The New Zealand dollar extended its gains against the Australian dollar as divergent policy positions of the two countries' central banks boosted the relative appeal of the kiwi and local interest rates.

The kiwi climbed to 95.60 Australian cents, the highest since mid-January, and traded at 95.51 cents as at 5pm in Wellington, from 94.91 cents late yesterday. The local currency slipped to 74.21 US cents from 74.33 cents yesterday.

The Australian Reserve Bank last week cut its cash rate a quarter point to a record low 2.25 percent while New Zealand central bank governor Graeme Wheeler last week said policy was in neutral rather than being in line for easing. He had kept the official cash rate at 3.5 percent, making the RBNZ a standout in a world where major central banks have kept their target rates near zero.

"There are very different directions of monetary policy paths in Australia and New Zealand - I think that's the main driver" of the cross rate," said Imre Speizer, market strategist at Westpac Banking Corp.

Speizer said he has retained his multi-month target for the kiwi to fall back toward 71 US cents, given that "the Fed rhetoric is pointing to a June hike." He said the kiwi's short-term correction would go no higher than 76 US cents.

The kiwi didn't move much after data showed house prices and sales volumes slipped in January from December in a typical summer holiday slowdown. In the past 12 months, the median price in Auckland has jumped 16 percent, while for the rest of the country the gain was just 1.8 percent.

The New Zealand dollar weakened to 65.56 euro cents from 65.55 cents yesterday and traded at 48.67 British pence from 48.76 pence. It gained to 88.77 yen from 88.06 yen.

The trade-weighted index rose to 77.09 from 76.97 yesterday.