By Gary Howes

The New Zealand dollar has enjoyed a dramatic advance against the pound sterling on a day that has seen many traders holding onto GBP forcibly evicted from the market.

The pound sterling to New Zealand dollar exchange rate (GBP/NZD) has endured a dramatic slump on Monday - the exchange rate is trading 1.5 pct lower having reached 19579 in the London afternoon trading session.

(Please note our NZD quotes are taken from the spot markets; your bank will subtract a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer and deliver you up to 5% more currency. Please learn more here.)

The declines in GBP/NZD comes amidst a broadly negative turn in sentiment towards GBP, the full details of which can be found here.

"The New Zealand dollar looks firmer, and a lack of support for the pound means the rate could move lower still. With a rate increase from the RBNZ due to come into place this year, the kiwi will continue to limit sterling gains," says Sasha Nugent at Caxton FX.

Ahead, NZIER Business Confidence will be released at 21:00 and could encourage the move further. The rate has declined considerably today, and the pound will struggle to keep the rate above 1.97.

New Zealand dollar forecasted to outperform

While the British pound struggles we note that sentiment towards the NZ dollar remains positive with analysts predicting further gains lie ahead.

"NZD may outperform on expectation of rate hike in March by the RBNZ. GBP/NZD may drop to 1.9634, with resistance at 2.0028," says a flash-note issued by Citigroup.

AUD/NZD decline coming to an end?

Meanwhile, the New Zealand dollar's stellar run against the Australian dollar may be coming to an end.

Shaun Osborne, TD Securities says:

"The Kiwi’s prime advantage over the AUD over the past few months has been the belief that the RBNZ risked tightening policy ahead of the RBA.

"The New Zealand Dollar is on the rise against many of its peers as economists predict that the ‘Kiwi’ will reach parity with its Australian relation sometime this year. Whilst the Australian economy is weakening the New Zealand economy is thriving.

"The economy’s upward spiral is being attributed to high dairy prices, low interest rates and a construction boom in post-earthquake Christchurch."