At 0700 AEDT on Wednesday, the Australian dollar was trading at 88.03 US cents, down from 88.19 cents on Tuesday.
Data out of New Zealand on Tuesday showed higher than expected inflation with a rise of 0.1 per cent in the December quarter. Economists were expecting a 0.1 per cent fall.
The surprise fuelled expectations that Australian data, to be released on Wednesday, could show a rise in inflation, which could take further cash rate cuts off the table.
Westpac senior market strategist Imre Speizer said the Australian dollar bounced around on Tuesday night and was now in wait-and-see mode ahead of the inflation data.
“Global markets last night could be summed up as being undecided,” Speizer said.
“But looking ahead today, clearly the focus will be on the Aussie CPI.
“Those watching the NZ positive surprise might be bracing themselves for a positive Aussie surprise as well but that being the case, some of that might already be priced in.”