The New Zealand dollar fell to a three-week low as traders took yesterday's weaker inflation reading from the Reserve Bank's survey of expectations as evidence the bank will lag behind its global peers in hiking interest rates, reducing the kiwi's appeal.
The kiwi dollar traded at 73.54 US cents as at 8am in Wellington from 73.99 cents late yesterday. The trade-weighted index fell to 77.56 from 77.93.
The New Zealand dollar has fallen 2.7 per cent from its recent high on July 27, when it touched its highest level in more than two years.
Traders have reduced their bets that the local currency could push higher because the RBNZ's monetary policy statement on Thursday is expected to project little increase, if any, in interest rates in coming years as the economy continues to grow without fuelling inflation.
"The fall likely reflects traders reducing (extreme) net long positions ahead of the MPS, which isn't expected to be supportive to the NZD, with inflation tracking lower than the RBNZ projected back in May," Jason Wong, currency strategist at Bank of New Zealand, said in a note.