The New Zealand dollar gained about half a cent against the US dollar in afternoon trading today, but is expected to come under pressure overnight.
ANZ senior foreign exchange strategist Sam Tuck said the global dairy trade auction is likely to see the dollar weaken.
"We still believe the New Zealand dollar has more declines to come. The immediate focus, of course, will be the global dairy trade auction. We're looking at that for a signal as to whether our largest export commodity is going to see increased demand.
"We're seeing risks to the downside at the moment, due to trade sanctions in Russia causing European supply to flood the international market. But we'll be looking to the forward pricing for dairy to see signs of a pick-up in prices in future contracts.
"Then we'll be moving our attention squarely to the FOMC, the US Federal Reserve, to see whether they are going to signal that they're beginning to worry more about the US economy running too hot rather than too cold. And of course, the backward-looking QT GDP for the New Zealand economy on Thursday morning as well."
At 5.20pm today, the New Zealand dollar was up at 81.62 US cents, 90.55 Australian, 50.33 British pence, 0.6308 euro, 87.51 yen and 5.02 renminbi.
New Zealand shares were mostly weaker today, with the benchmark Top 50 Index falling 21 points to 5190.
Harbour Asset Management director Craig Stent said the market is cautious ahead of the general election on Saturday and some key economic data out of the US later in the week.
"The markets are generally down today, reflecting some uncertainty ahead of the key Federal Reserve meeting. Across the New Zealand markets, just general weakness across the board, following along with the Australia and Asian markets.
"Probably the key movers today is the retirement sector, potentially around the news of a further IPO in the sector. Some of the 'gentailers' also giving back some of the recent gains - with Meridian, Genesis and Contact all down.
"Bouncing back today is Xero, which has had a few days in a row of having negative performance and also from TradeMe, Fletcher Building and SkyCity which are all positive movers on the local index."
Meridian's share price fell 2 cents to $1.38, Genesis was down 1 cent to $1.94, Contact was 7c lower to $5.54, while TradeMe lost 1 cent to end day at $3.45.
Xero was up 96 cents to $21, Fletcher Building gained 7 cents to $8.93 and Sky City rose 1 cent to $3.73.