The New Zealand dollar may extend its recent rally on expectations the yield differential to the US may be kept in check near term.

The kiwi traded at 65.83 US cents as at 5pm in Wellington from 65.90 cents at 8am, up from 65.68 cents yesterday. The trade-weighted index was at 71.89 from 71.75 yesterday.

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The greenback has lost a little of its lustre in recent days as investors question whether minutes from the Fed's last policy meeting indicate a more gradual track to higher interest rates, rather than the more aggressive one some analysts predict.

At the same time, higher-than-expected inflation in New Zealand has seen traders dial back bets on the Reserve Bank cutting the official cash rate.

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The yield on US 10-year Treasuries is only 46 basis points higher than its New Zealand counterpart, having been as wide as 60 points earlier this month.

"There's a few people starting to worry that the Fed is going to rein in expectations around further hikes," said Mitchell McIntyre, a dealer at HiFX.

"The US dollar is over-bought as it is, and that's combining that with the kiwi which is well-short," he said, referring to the high number of 'short' positions in the currency, where traders are selling it in the expectation the kiwi can be bought back at a lower price.

McIntyre said the kiwi may rise to 66.50/67 US cents in the near-term as investors reposition their portfolios. The longer-term trend for a stronger US dollar remained intact, he said.

New Zealand's two-year swap rate fell 2 basis points to 2.01 per cent; the 10-year swaps decreased 1 basis point to 2.90 per cent.

The local currency rose to 4.5573 Chinese yuan from 4.5472 yuan yesterday. The People's Bank of China set a lower fix than expected today.

The kiwi edged up to 92.25 Australian cents from 92.13 cents yesterday and increased to 73.95 yen from 73.54 yen. It was unchanged at 49.97 British pence and increased to 56.93 euro cents form 56.73 cents.