The New Zealand dollar was stronger against the currencies of all the nation's major trading partners on Tuesday.
Bancorp Treasury Services senior client advisor Peter Cavanaugh said the market's expectations of further rises in interest rates were boosted by a survey of businesses.
He said the New Zealand Institute of Economic Research's quarterly survey of business opinion gave the market hopes for an official cash rate rise later this month.
"Business confidence fell as expected, which is not surprising given we've seen two OCR rises, lower commodity export prices, higher costs and reduced margins for businesses over the past quarter."
Mr Cavanaugh said from the Reserve Bank's point of view there were increased costs and selling prices with threats to rising labour and capacity constraints which were consistent with the official cash rate rising over the course of the rest of the year.
He said those capacity restraints have lifted the New Zealand dollar.
At about 5pm on Tuesday, the kiwi was trading at 87.67 US cents, up almost half a cent from the same time on Monday, at 93.36 Australian cents, 51.16 British pence, 64.42 euro, 89.19 yen and 5.44 renminbi.
New Zealand shares fell, the benchmark Top 50 Index falling 20 points to 5166.
Harbour Asset Management portfolio manager Shane Solly said the signals from offshore markets were poor but the market was reasonably resilient.
He said New Zealand Oil & Gas came up with another non-producing well and Air New Zealand was also slightly weaker after having a very good run over the last 12 months.
Mr Solly said by contrast Nuplex and Kathmandu bounced back slightly after dropping last month over earnings cuts.
Xero shares fell 49 cents to $26.01, shares in New Zealand Oil & Gas eased 2 cents to 79 cents and Air New Zealand's shares dropped 4.5 cents to $2.13.
Nuplex shares rose 5 cents to $3.05 and Kathmandu shares gained 3 cents to $3.22.