The New Zealand dollar edged lower after Chinese stocks recovered from a sharp decline that sapped investors' appetite for risk-sensitive assets around the world.

The kiwi declined to 67.39 US cents at 5pm in Wellington from 67.42 cents at 8am, and 67.51 cents yesterday. The trade-weighted fell to 73.55 from 74.19 yesterday.

The Shanghai Composite index rose 0.4 percent in afternoon trading, allaying fears of another rout after China's benchmark stock index fell 7 percent yesterday, triggering a trading halt.

That calm comes ahead of the first GlobalDairyTrade auction of the year. A slump in whole milk powder prices in 2015 eroded New Zealand's terms of trade, prompting interest rate cuts by the Reserve Bank.


"The market hinged on what Shanghai's doing - it opened down 3 percent, but is now up which is probably a welcome relief in terms of risk," said Martin Johnson, senior dealer foreign exchange at OMF in Wellington.

"The kiwi hasn't traded in a very substantial range today."

The mounting tensions between Saudi Arabia and Iran over the execution of Shiite cleric Nimr al-Nimr also weighed on risk-sensitive assets such as the kiwi dollar, with the geopolitical uncertainty adding more pressure to oil prices suffering from a global oversupply.

The major event this week is the December US non-farms payroll report on Friday in Washington, which investors will use to gauge the strength of the world's biggest economy.

Until then, traders will largely take their cues from equity markets, OMF's Johnson said.

The local currency increased to 93.57 Australian cents at 5pm in Wellington from 93.39 cents yesterday, and slipped to 4.3930 Chinese yuan from 4.3947 yuan.

It increased to 62.28 euro cents from 62.08 cents yesterday, and was little changed at 45.76 British pence from 45.86 pence.

The kiwi declined to 80.54 yen from 80.75 yen yesterday.

New Zealand's two-year swap rate decreased one basis point to 2.82 percent at 5pm in Wellington, and 10-year swaps fell four basis points to 3.69 percent.