The New Zealand dollar rose to a fresh five-year high against the Australian dollar overnight on expectations the local economy will continue to outperform that of its closest neighbour.

The kiwi touched 89.99 Australian cents on Monday night, and was trading at 89.51 cents at 8am in Wellington, from 89.75 cents at the Monday’s market close. The local currency slipped to 81.96 US cents from 82.20 cents.

Reports this week are expected to show the contrast between a revival in New Zealand’s economy and slower growth in Australia.

That continued divergence means traders are pricing in a series of interest rate hikes in New Zealand over the next year and only a minimal chance that Australia’s benchmark rate will rise, increasing the lure of the local currency.

Mike Jones, currency strategist at Bank of New Zealand, said it looked like the kiwi will climb to 90 cents and it expects it to remain above 88 cents for all of 2014.

Traders tip the Reserve Bank of Australia to increase its benchmark 2.5 per cent interest rate by 7 basis points over the coming year, while New Zealand’s Reserve Bank is expected to raise its 2.5 per cent rate by 101 basis points in the same period, according to the Overnight Index Swap Rate. Australia will review its key rate next Tuesday, with New Zealand’s review the following week on December 11.

Traders will be eyeing Thursday’s report on Australian third-quarter capital spending for an indication on how the mining sector is tracking.

In New Zealand this week, October overseas trade data scheduled for release on Wednesday is expected to provide further evidence of the post-drought rebound in dairy production while an ANZ business confidence survey on Thursday should show continued optimism.

The New Zealand dollar weakened to 83.36 yen from 83.57 yen, it advanced to 50.74 British pence from 50.49 pence and was little changed at 60.64 euro cents from 60.68 cents. The trade-weighted index slipped to 77.06 from 77.22.