The Reserve Bank of New Zealand Governor Allan Bollard is likely to raise interest rates in September and then take a respite to allow the economy to grow further amid a fragile global recovery, RBC Capital Markets today said in a forecast.

The unit of Royal Bank of Canada, the country's largest lender forecasts a 25-basis point increase at the New Zealand central bank's September meeting and most likely to finish the year at 3.25 percent.

Analysts at RBC Capital Markets have slashed down expectations for New Zealand rate increases after Bollard raised the official cash rate for the second month in a row and said the growth outlook has "softened."

Traders have lowered expectations for interest rates after Governor Alan Bollard said in a statement that further increases are likely to be more moderate than the central bank's June projections.

Analysts perceived Bollard's statement as downbeat, thus, revising their forecast to 4.25 percent from 4.5 percent.

The kiwi dropped to a one-week low of 72.02 cents before buying 72.18 U.S. cents as of 10:51 a.m. in Sydney. The currency reached a six-month high this week against the dollar.

New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 4.09 percent from 4.17 percent yesterday.

Statistics New Zealand said in Wellington today the country's trade surplus shrank to NZ$276 million ($199 million) from a revised NZ$768 million in May. Exports fell 9.8 percent from a record in May to NZ$3.78 billion, today's report showed.

"The outlook for economic growth has softened somewhat," Bollard said. "It is still appropriate to continue to reduce the extraordinary level of support implemented during the 2008/09 recession."