The New Zealand dollar fell after Federal Reserve chair Janet Yellen kept open the chance of a rate hike next month as the world's biggest central bank tightens monetary policy, pushing up yields on US Treasuries and stoking demand for the greenback.

The kiwi slipped to 71.55 US cents as at 8am from 71.75 cents yesterday. The trade-weighted index edged down to 78.03 from 78.17.

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Yellen told the US Senate's banking committee that a "gradual rise in rates will be required" and that waiting too long "would be unwise". While she wasn't specific on when the next hike would come, she kept alive the possibility it could be as early as next month. Yields on US 10-year treasuries rose 4 basis points to 2.48 percent and the US dollar index was up 0.3 percent to 101.27.

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"Yellen played a straight bat and broadly reiterated her previous messaging, forecasting ongoing progress toward the Fed's goals and gradual policy tightening," Bank of New Zealand currency strategist Jason Wong said in a note. "With risk appetite remaining high, with the VIX index hovering down around 11, that takes the NZD further away from our fair value estimate around the 74 (US cents) mark."

The kiwi traded at 57.38 British pence from 57.24 pence yesterday after UK inflation figures were weaker than expected, and it was little changed at 67.68 euro cents from 67.67 cents as Italian and German gross domestic product were a touch below forecasts.

The local currency was unchanged at 93.52 Australian cents after the National Australia Bank survey yesterday showed firms were increasingly optimistic across the Tasman. It rose to 81.77 yen from 81.48 yen yesterday and fell to 4.9118 Chinese yuan from 4.9354 yuan.

(BusinessDesk)