The New Zealand dollar declined overnight as investors bet the kiwi had gained too much against the Aussie yesterday, with the pullback causing general weakness in the local currency.

The kiwi slipped to 66.25 US cents at 8am in Wellington, from 66.59 cents at 5pm yesterday. It dropped to 92.64 Australian cents from 92.92 cents, after touching a high of 93.07 cents overnight. The trade-weighted index fell to 72.06 from 72.33 yesterday.

The Aussie dollar dropped yesterday after a report showed the country's unemployment rate unexpectedly rose in January, in what has been a volatile data series. The kiwi gave up some of its gains against the Aussie overnight as investors bet the move was overdone, which pushed the New Zealand dollar down against other currencies.

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Kiwi "got bought up yesterday against the Australian dollar as the Aussies unveiled a weakish but not a significantly poor Aussie employment report and I think there's probably a little bit of selling of the kiwi versus the Aussie up around that 93 Australian cent area, that's probably the driver that's just seen the kiwi come back a little bit," said OMF private client manager Graham Parlane.


"There's quite a significant correlation between New Zealand and Australian interest rates and at the moment that spread implies that the kiwi/Aussie should be lower so I think there's probably keen sellers of the kiwi against the Australian dollar up around that 93 Australian cent area."

OMF's Parlane expects the kiwi to trade between 66 US cents and 66.50 cents today with a mild upside bias as investors pull back bets on US interest rate hikes.

The New Zealand dollar slipped to 59.62 euro cents from 59.78 cents yesterday, dropped to 46.22 British pence from 46.55 pence, fell to 75.20 yen from 75.85 yen, and declined to 4.3170 yuan from 4.3397 yuan