Powell emphasized trade tensions and concerns over the strength of the global economy in his half-yearly testimony before the US House Financial Services Committee. He also said low inflation may prove even more persistent than currently expected.
Markets immediately moved to price-in a 30 per cent chance of a 50 basis-point rate cut at the end of July. A 25-basis point cut remains fully priced.
Imre Speizer, market strategist at Westpac, said the kiwi took an "abrupt jump higher" when Powell began talking and then nudged higher when Asian markets began trading.
Powell is also due to present testimony to the Senate Banking Committee overnight. The prepared remarks will be the same but there is also a question and answer session.
Speizer said that gives Powell another opportunity to reiterate the message or to walk it back should he choose to do so, although that would be unusual.
Investors will also be keeping a close eye on US consumer price index data for June, due tonight. Economists surveyed by the Wall Street Journal expect the CPI to be flat in June from May and up 1.6 per cent from a year earlier, underscoring the Fed's concerns about weak inflation pressures.
The next major event for the kiwi dollar will be domestic inflation data, due next Tuesday. ASB Bank is forecasting that annual inflation will be 1.7 per cent in the second quarter but notes that "risks to our pick are tilted to the downside."
The kiwi traded at 95.54 Australian cents from 95.42 cents this morning. It was at 53.18 British pence from 53.09, at 59.12 euro cents from 59.00, at 71.95 yen from 72.00, and at 4.5763 Chinese yuan from 4.5613.
The New Zealand two-year swap rate was at 1.3123 per cent from 1.3242 late yesterday, while the 10-year swap rate was at 1.7450 per cent from 1.7400 per cent.
