The 26-year-old tore his anterior cruciate ligament when fielding for Central Districts Stags against the Northern Knights over the weekend, local media reported.
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The injury rules Bracewell out of New Zealand's home Test and limited overs series against Bangladesh later this month.
The Kiwi international could also miss the three-match ODI series against Australia starting from January 30.
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Bracewell, who was overlooked by selectors for the recently concluded Test series against Pakistan, last played for the Black Caps in an ODI series against India in October.
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