The New Zealand dollar extended its decline, falling below 66 US cents as the prospect of more easing by the Reserve Bank dented the appeal of the kiwi in an environment where the US Federal Reserve prepares to hike interest rates.

The kiwi was trading at 66.02 US cents as at 8.30am in Wellington, having earlier fallen as low as 65.64 cents, from 66.39 cents late yesterday.The trade-weighted index fell to 70.53 from 70.74.

RBNZ governor Graeme Wheeler's speech this week warned traders against expecting big further cuts to the official cash rate while reiterating the central bank remains in easing mode and sees the dollar as still being over-valued because of weak dairy prices and a deteriorating external trade position.

So far this year, the kiwi has shed about 15 per cent of its value. The dollar index, which measures the greenback against a basket of currencies, has climbed about 8 per cent in the same period.

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US government figures showed domestic product increased at a 2.3 per cent annualised rate in the second quarter, up from a revised 0.6 per cent pace of growth in the first quarter.

"The market seems refocused on the broader fundamentals, i.e. the RBNZ remains in easing mode as the US Fed is inching toward its first rate hike," said Kymberly Martin, a strategist at the Bank of New Zealand.

"The rate of NZ GDP growth has peaked at a time when momentum is tentatively improving in the US."

Martin said the kiwi will find support at 65 US cents, while resistance in the near term is at about 66.50 cents.

On the local calendar today, business confidence for July is likely to be closely watched after the monthly ANZ Business Outlook series turned negative in June, the first time pessimists have been in the majority since the Christchurch earthquake in February 2011, led by a gloomy agricultural sector.

Fonterra Cooperative Group yesterday announced it will reduce supply at next week's GlobalDairyTrade auction, which has been keenly watched as falling dairy prices weigh on New Zealand's terms of trade.

The local currency traded at 90.52 Australian cents from 90.66 cents yesterday and dropped to 60.33 euro cents from 60.46 cents.

It fell to 42.31 British pence from 42.54 pence and declined to 81.93 yen from 82.36 yen.

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