SYDNEY: New Zealand's dollar is set to suffer more pain, as markets brace for a string of interest-rate cuts from the central bank starting this week.

Commonwealth Bank of Australia predicts the currency will decline to NZ$1.15 per Australian dollar by year-end, the weakest level in more than a decade, while Kiwibank sees the kiwi extending last quarter's slump against the greenback.

The bearish calls follow a run of disappointing domestic data, including a deeper-than-expected economic contraction in the second quarter.

Markets are now fully pricing in a quarter-point interest-rate cut from the Reserve Bank of New Zealand (RBNZ) soon, with a prospect of a bigger reduction.

"Interest-rate differentials are back in the driver's seat and we expect the RBNZ to deliver a 50 basis-point cut.

"This is a move that is not completely priced into rates markets," said Mary Jo Vergara, an economist at Kiwibank in Auckland.

"The kiwi dollar will likely lose more ground against the Aussie dollar, euro and pound as the RBNZ delivers easing more than its peers."

Markets are fully pricing in a quarter-point rate cut at the RBNZ meeting, and see about a 30% chance of a 50 basis-point reduction, based on data compiled by Bloomberg based on swaps.

"The New Zealand dollar has been the underperformer among the Group-of-10 (G10) over the past three months, and that can continue if the economy remains in its subdued state over the next few months," said Imre Speizer, a markets strategist at Westpac Banking Corp in Auckland.

"The kiwi dollar should weaken against most G10 currencies during the week ahead, given the possibility of a 50-basis-point cut." -- Bloomberg