Kiwi Poised to Outpace Euro on Widening Rate Gap

New Zealand's dollar is set to rise against the euro due to expectations that the Reserve Bank of New Zealand will outpace its European peer in raising interest rates.

Macquarie Bank Ltd. predicts the kiwi will climb as much as 3.2% against the euro over the next three months, while Westpac Banking Corp. and Canadian Imperial Bank of Commerce are also bullish on the kiwi's prospects.

The Reserve Bank of New Zealand is expected to increase its benchmark rate by more than a percentage point over the next year, compared with about 75 basis points of tightening from the European Central Bank.

Gareth Berry, a foreign-exchange strategist at Macquarie in Singapore, said 'We can imagine EUR/NZD drifting lower toward the 1.90 level over the next three months as RBNZ rate hikes are delivered.'