The kiwi initially rose when the minutes of the Fed's January 30-31 policy meeting showed committee members still favoured more gradual rate hikes but swiftly pared the gains as investors digested the fact that the economic outlook was more positive.
According to the minutes, a majority of participants noted that a stronger outlook for economic growth raised the likelihood that further gradual policy firming would be appropriate and "almost all participants continued to anticipate that inflation would move up to the committee's 2 per cent (per annum) objective over the medium term as economic growth remained above trend and the labor market stayed strong."
Three rate hikes are now almost fully priced in for this year, compared to two in December, Reuters reported.
"The dollar initially fell but then turned around as the market decided the minutes are probably mildly more upbeat," said Ross Weston, a senior trader at Kiwibank. With little domestic data to push things around, the New Zealand dollar will remain at the mercy of US dollar moves, he said.
He noted, however, markets will be watching for the fourth quarter retail trade survey Friday. Investors are expecting a fairly strong number, which could help the New Zealand dollar, "but it's not really about the kiwi right now, it all about the US dollar," he said.
The kiwi rose to 93.72 Australian cents from 93.31 cents yesterday. The kiwi traded at 59.52 euro cents from 59.46 cents and gained to 52.54 British pence from 52.42 pence. It eased to 78.44 yen from 79.02 yen and fell to 4.6388 yuan from 4.6525 yuan.
New Zealand's two-year swap rate rose 1 basis point to 2.17 per cent, while 10-year swaps were unchanged at 3.26 per cent.