NZ Dollar Extends Decline Ahead Of RBNZ Rate Decision

The New Zealand dollar extended its early slide against most major counterparts in European trading on Wednesday, as traders await the Reserve Bank of New Zealand's interest rate decision tomorrow, with expectations that the bank would keep the official cash rate unchanged at the current record low of 2.25 percent.

Investors look forward to the comments from the Governor Graeme Wheeler for signals about future easing.

The central bank is likely to talk down the kiwi, as an overly valued currency exerts downward pressures on domestic inflation, and hint that lower currency exchange rate would be appropriate.

The Federal Reserve will announce latest monetary policy decision at the end of a two-meeting concluding later today.

The U.S. central bank is widely expected to leave interest rates unchanged, but investors are eager to know if a move is likely at the next FOMC meeting in June.

European shares are mostly higher, as encouraging data out of Germany and higher oil prices offset worries over a steep fall in Greek shares.

In economic front, figures from Statistics New Zealand showed that New Zealand's foreign trade deficit widened notably in March, posting the largest annual trade deficit in seven years.

The trade deficit widened to NZ$3.8 billion in the twelve months ended March from NZ$2.37 billion in the corresponding month last year. It was the biggest annual trade deficit since April 2009.

The kiwi has been weaker against its key counterparts, except the aussie, in Asian deals.

The kiwi slipped to a new 2-week low of 1.6524 against the euro, from an early 2-day high of 1.6345. If the kiwi extends decline, 1.67 is likely seen as its next support level.

Survey data from market research group GfK showed that German consumer optimism improved unexpectedly in May.

The forward-looking consumer sentiment index rose to 9.7 from 9.4 in April. It was forecast to remain unchanged in May.

The kiwi dropped to a 2-day low of 0.6839 against the greenback, compared to 0.6892 hit late New York Tuesday. The kiwi is seen finding support around the 0.67 zone.

The kiwi fell to 76.14 against the yen, from an early 1-week high of 76.84. The next likely support for the kiwi may be found around the 74.00 area.

Figures from the Ministry of Economy, Trade and Industry showed that Japan's all industry activity decreased at a slower-than-expected pace in February, after rising in the previous month.

The all industry activity index fell 1.2 percent month-over-month in February, in contrast to a 1.2 percent climb in January. Economists had expected a 1.3 percent decline for the month.

On the flip side, the kiwi advanced to near a 2-week high of 1.1060 against the aussie, off its session's low of 1.1252. The pair was worth 1.1223 when it ended Tuesday's trading.

Looking ahead, U.S. pending home sales data for March and weekly crude oil inventories data are set to be published in the New York session.

At 2:00 pm ET, the Federal Reserve will announce its decision on monetary policy. The Fed is expected to hold the funds rate at 0.25 to 0.5 percent.

At 3:00 pm ET, Canadian Finance Minister Bill Morneau is expected to speak to the Greater Vancouver Board of Trade, giving an overview of the Canadian government's plan to strengthen the middle class and invest in the economy, in Vancouver.