The New Zealand dollar declined as concerns about Chinese policy to weaken the yuan abated, turning attention to the likelihood of an interest rate rise in the US.
The kiwi fell to 65.77 US cents at 8am in Wellington, from 66.09 cents at 5pm yesterday. The trade-weighted index slipped to 70.60 from 70.97 yesterday.
The People's Bank of China yesterday dismissed suggestions its move this week to allow the yuan to trade more freely was a deliberate devaluation of its currency to make its exports more competitive, and said there was no reason for the depreciation to continue.
That eased traders concerns, and turned the focus to the potential for an interest rate hike in the US when the Federal Reserve meets next month after better retail sales data was released yesterday.
"Markets struck a calmer tone following comments from PBoC policymakers, who stated that there was no basis for the currency's constant depreciation and that the adjustment was already largely complete, which helped to dampen market volatility," ANZ Bank New Zealand senior rates strategist David Croy and senior FX strategist Sam Tuck said in a note. "This leaves markets to focus on overarching themes, mostly of US dollar strength.