The New Zealand dollar rose to its highest level in almost a week after minutes of the last Federal Reserve policy meeting showed lingering concerns about persistently low inflation, echoing outgoing chair Janet Yellen's view that weak prices may not be transitory.
The kiwi dollar rose to 68.67 US cents as at 8.30am in Wellington from 68.26 cents late yesterday. The trade-weighted index rose to 72.49 from 72.32.
The Fed minutes were released after US figures showed durable goods orders unexpectedly dropped 1.2 per cent in October.
While Fed policymakers expected interest rates would have to be raised soon, some wanted to see more data for confirmation inflation was on the rise and two were concerned about weak inflation.
In a speech yesterday, Yellen said while inflation should rebound, she was "very uncertain about this. My colleagues and I are not certain that it is transitory, and we are monitoring inflation very closely."
The market has priced in a rate hike at the December 13 Fed meeting.
"The kiwi popped in the face of a further burst of US dollar weakness," said Mark Johnson, a senior dealer at OMF.
"Yellen sowed the seed yesterday - she expects a rebound but if prices remained low you could end up in a situation where weak US inflation moves from transitory low to permanent low."
Johnson said with Yellen due to stand down with the appointment of her successor, her comments may not carry as much weight. The kiwi would run into resistance if it reached 69.30 US cents in the near term and would find support if it fell to 68 cents, he said.
Today traders will be watching for New Zealand third-quarter retail sales, with expectations growth in sales slowed to 0.1 per cent from 2 per cent three months earlier.
The number is expected to be soft compared with the second quarter, which benefitted from tourism spending around sporting events, amid signs the housing market is slowing, economists said.
The kiwi rose to 90.34 Australian cents from 90.21 cents. It was little changed at 58.15 euro cents from 58.16 cents and traded at 51.59 British pence from 51.50 pence.
The local currency rose to 4.5394 yuan from 4.5250 yuan and fell to 76.46 yen from 76.65 yen.