• The New Zealand Dollar (NZD) extends upside in Wednesday’s early Asian session. 
• Improved risk sentiment and softer US Dollar support the NZD/USD pair. 
• Market participants await the RBNZ interest rate decision, with no change in rate expected. 

The New Zealand Dollar (NZD) extends the rally on the weaker Greenback on Wednesday. Further optimism in the risk sentiment has maintained the US Dollar (USD) under pressure in the previous sessions and created a tailwind for the pair. The signs of stronger demand from China also underpin the Kiwi as China is New Zealand's largest trading partner.

Nonetheless, escalating geopolitical tensions in the Middle East might limit the upside for the NZD. All eyes will be on the Reserve Bank of New Zealand (RBNZ) interest rate decision on Wednesday at 02:00 GMT. The New Zealand central bank will likely hold its Official Cash Rate (OCR) at 5.50% at its August meeting. The policy decision appears to be a “close call” between a hold and a cut, as inflation expectations fall. Traders will take more cues from the Press conference, and dovish comments from RBNZ Governor Adrian Orr could weigh on the Kiwi. Later in the day, the US July Consumer Price Index (CPI) will be in the spotlight.