The New Zealand dollar took a tumble against the Australian dollar after weak domestic inflation contrasted sharply with a more upbeat economic outlook from the Reserve Bank of Australian in the minutes of its last meeting.

The kiwi traded at 92.85 Australian cents as at 5pm in Wellington from 93.85 cents at 8am and from 93.81 cents yesterday. The kiwi traded at 73.38 US cents versus 73.30 cents late yesterday.

The New Zealand dollar took an initial tumble when Statistics New Zealand reported that consumer prices were unchanged in the second quarter while annual inflation was 1.7 per cent, as the market pared back expectations the central bank might soon join others - like the Bank of Canada - that have lifted or are expected to lift rates soon.

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"The parity party is cancelled," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

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Economists had expected inflation of 0.2 per cent in the second quarter, for an annual rate of 1.9 per cent. The data also undershot the central bank's forecasts for inflation of 0.3 per cent in the second quarter for an annual rise of 2.1 per cent.

"These inflation figures should lead to a substantial rethink in financial markets, which have been persistently pricing a hike in the Official Cash Rate by mid-2018," said Westpac Bank in a note.

The Reserve Bank has forecast that rates won't lift until September 2019. The kiwi came under further pressure when the Reserve Bank of Australia turned more upbeat on the economic outlook, citing an improving labour market, stronger public investment and a pick up in household consumption, in the minutes from its July meeting.

While markets saw the comments as hawkish, pushing the Australian dollar higher, Capital Economics chief Australia and New Zealand economist Paul Dales said while the RBA acknowledged that the economic outlook remains positive "it doesn't seem eager to pull the rate hike trigger."

Dales said speeches this week and next by Deputy governor Guy Debelle and governor Phil Lowe will be closely watched for further clues.

While the New Zealand dollar initially fell against the greenback it managed to lift again after the US dollar came under pressure from the failure of a second attempt to pass a bill in the US Senate late on Monday. President Donald Trump called for an outright repeal of Obamacare while others are seeking a change in direction toward bipartisanship, Reuters reported.

Looking ahead, Kelleher said investors will be watching for the results of the GlobalDairyTrade auction later in the global trading day, with whole milk powder expected to lift between 1 per cent and 3 per cent.

Following that the focus will shift to the European Central Bank and the Bank of Japan's rate decisions on Thursday, he said.

The kiwi slipped to 63.64 euro cents from 63.93 cents late yesterday and fell to 82.21 yen from 82.53 yen. It fell to 4.9618 yuan from 4.9615 yuan and rose to 56.03 British pence from 55.97 pence.

The trade-weighted index fell to 77.76 from 77.97.

New Zealand's two-year swap rate fell 2 basis points to 2.21 while the 10-year swaps fell1 basis points to 3.32 per cent.