The New Zealand dollar recouped early losses made after the central bank delayed raising interest rates as the country entered a snap COVID-19 lockdown, while the Australian dollar also edged higher.
The Kiwi traded up 0.17% at $0.6935 by 0459 GMT, having fallen about 1% to $0.6868 NZD=D3 immediately after the Reserve Bank of New Zealand announced it would keep rates at 0.25%, defying expectations by a majority of economists in a Reuters poll.
The central bank had been widely expected to become the first in the Asia-Pacific region to raise interest rates since the pandemic began but quickly shifted gears after the country was put into a snap lockdown over a handful of new cases.
"I expect the New Zealand dollar to stay under pressure for now," said Maafumi Yamamoto, currency strategist at Mizuho.
"I suspect there are concerns that New Zealand could follow the path of Australia, where lockdowns are failing to contain the Delta variant. Lockdowns could be well extended and that could hurt sentiment in the country."
New Zealand bond prices fell
0#NZTSY= across maturities, but longer-dated debt underperformed, with yields rising four to five basis points in that part of the curve."This 'hawkish hold' outcome may be a headwind for NZ government bonds in the near term, but we'd expect markets to more fully price the tightening cycle if the Covid situation becomes less uncertain over the next few weeks," said Westpac strategist Imre Speizer.
The Australian dollar AUD=D3 also rose 0.15% to $0.7266. Data earlier showed wage growth picked up by less than expected last quarter.
Australian government bonds were stable, with the 10-year benchmark AU10YT=RR yielding 1.148%, while yields in 3-year bonds AU3YT=RR fell one basis point to 0.229%.
