The New Zealand dollar gained as US bonds rose in Asia, capping a selloff that drove yields to their highest levels this year and dragged the greenback up with them.

The kiwi traded at 71.11 US cents as at 5pm in Wellington, from 70.98 cents late yesterday. The trade-weighted index rose to 77.47 from 77.18.

The yield on benchmark US 10-year Treasuries reached as high as 2.3 per cent overnight but has since retreated back to 2.21 per cent, according to Reuters data. The US dollar index fell 0.2 per cent from its highest level in about a year as US bond yields slipped. US bonds have tumbled, pushing yields higher, amid expectations a Donald Trump presidency will stoke the US economy and inflation. Meanwhile, in New Zealand, traders expect the central bank is done cutting interest rates and may look to hike towards the end of 2017.

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"We've finally seen the US bond market subsiding in Asia," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. Still, "we do think rates will go higher overall. Trump's policies are seen as inflationary. US dollar strength is likely to continue - it had just gone a bit too far, a bit too fast."

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Traders will be watching the result of the GlobalDairyTrade auction overnight, amid expectations of a price gain of 3-to-5 per cent, although Kelleher said the futures markets had been "a bit unreliable" of late. "If there's a massive number, it will be positive."

The kiwi dollar traded at 94.05 Australian cents from 94 cents late yesterday after minutes of the last Reserve Bank of Australia meeting showed officials were concerned the labour market across the Tasman might be weaker than it appeared.

The local currency rose to 76.88 yen from 76.22 yen yesterday and traded at 4.8769 yuan from 4.8431 yuan. It rose to 56.91 British pence from 56.50 pence and gained to 66.12 euro cents from 65.70 cents.

New Zealand's two-year swaps fell 2 basis points to 2.22 per cent while the 10-year swap rate fell 4 basis points to 3.24 per cent.