The New Zealand dollar touched a fresh four-year low on increased bets the Reserve Bank may cut interest rates after governor Graeme Wheeler said yesterday that inflation will stay low for longer and rates could go either way.

The kiwi touched 72.28 US cents, its lowest level since March 2011, and was trading at 72.36 cents at 8am in Wellington, from 73.34 cents at 5pm yesterday. The trade-weighted index declined to 75.23 from 75.83 yesterday.

The New Zealand dollar has dropped more than 2 US cents since governor Wheeler yesterday dropped his bias for higher interest rates and said the next move could be in either direction. Traders are betting the next rate move will be a cut, according to the Overnight Swap Curve.

The kiwi has had "a dramatic plunge", said Peter Cavanaugh, client adviser at Bancorp Treasury Services. "It's an overreaction because all he is done is move to a neutral stance. But the market has moved to an easing bias."

Still, Cavanaugh said the kiwi still risked moving lower against the US dollar over the weekend.

Today, New Zealand data is released for December building consents and migration.

The New Zealand dollar advanced to 93.40 Australian cents from 92.98 cents yesterday as traders speculate the Reserve Bank of Australia may start cutting interest rates as early as its meeting next Tuesday.

The local currency touched 63.90 euro cents, its lowest in almost four weeks, and was trading at 63.98 cents at 8am from 65.04 cents yesterday. It touched a three-month low of 48 British pence and was recently trading at 48.08 pence from 48.43 pence yesterday. Similarly, the kiwi fell to a three-month low of 85.54 yen and was recently trading at 85.68 yen from 86.50 yen yesterday.