The euro strengthened on Thursday, briefly rising above $1.10 for the first time in a week.
Elias Haddad, senior currency strategist at Commonwealth Bank, attributes the New Zealand dollar's relief rally to factors such as positioning adjustments and a tweak in the central bank's policy statement.
Given that New Zealand's economy remains weak, the central bank will likely opt for another rate cut in September, putting further pressure on the kiwi dollar, says Saktiandi Supaat, head of global FX strategy at Maybank.
RBNZ cut its interest rate to counter headwinds posed by tumbling dairy prices and low inflation, and said more easing was coming.
John Doyle, director of markets at Tempus, says the New Zealand dollar is seeing a kneejerk reaction to the rate cut and the currency will likely "mellow out" later in the session.
The dollar rose after its biggest fall in a month the previous session, while sterling gained in response to minutes from the Bank of England's last meeting.
Sim Moh Siong, FX strategist at Bank of Singapore, says the Reserve Bank of New Zealand will likely lower interest rates at its monthly policy meeting on Thursday.
The dollar retreated from a three-month high against a basket of currencies on Tuesday on profit-taking.
Japan's benchmark stock index is in touching distance of an 18-year high, thanks to a weakened yen which has come back into focus as events in China and Greece die down.
Khoon Goh, senior FX strategist at ANZ, expects the Reserve Bank of New Zealand (RBNZ) to cut rates by 25 basis points and strike a dovish bias at its policy meeting on Thursday.
Apart from supply issues, the drop in commodity prices also paints a weak picture for demand in Asia, says Sean Callow, senior currency strategist at Westpac.
The dollar reached its highest in three months against a basket of currencies on Monday.
Ray Attrill, global co-head of FX Strategy at National Australia Bank, says the New Zealand dollar could hit 60 U.S. cents, with the country's central bank likely to cut interest rates soon.
The dollar was on track for its biggest weekly gain in two months on Friday as investors bet on the chances of a U.S. interest rate hike.
The dollar index rallied to a seven-week peak, with an easing in jobless claims reinforcing market expectations of a US interest rate hike.
The dollar rose on Wednesday after Federal Chair Yellen reinforced market expectations for a U.S. interest rate hike, possibly as soon as September.
Ed Ponsi, Managing Director at Barchetta Capital Management, believes the common currency will remain in the 1.05-1.13 range against the greenback.
The dollar posted moderate losses against the euro and yen on Tuesday.
Jonathan Cavenagh, Senior FX Strategist at Westpac, says the euro could hit 1.05 or 1.06 per dollar over the next two to three months.
Toby Lawson, Managing Director of Societe Generale Newedge, says foreign investors still feel spooked from Beijing's recent intervention, but he doesn't expect that to last for too long.