The New Zealand dollar gained as minutes of the last Federal Reserve policy meeting showed some concern that inflation isn't as strong as expected, although policymakers appear committed to unwinding the Fed's massive balance sheet.
The kiwi rose to 73.06 US cents as at 8am in Wellington from 72.34 cents late yesterday. The trade-weighted index climbed to 77.05 from 76.52.
The minutes said that many participants at the meeting "saw some likelihood that inflation might remain below 2 per cent for longer than they currently expected" with some seeing a risk inflation may dwindle. That would reduce the need for another rate hike anytime soon.
However, the minutes also showed a commitment to reducing the Fed's US$4.2 trillion holding of Treasury bonds and mortgage-backed securities, with some traders saying an announcement could come in September.
The Fed minutes "show debate about timing of the next rate hike but broad agreement regarding starting balance sheet rundown 'soon', leaving September in play for an announcement on the (conditional) timing of it," said Sharon Zollner, senior economist at ANZ Bank New Zealand, in a note.