The kiwi popped up to $0.6771, from $0.6720 ahead of the figures, and looked set to test resistance around $0.6785. Speculators had shorted the currency in the hope inflation would be weak enough to narrow the odds on a cut in interest rates.
Instead, the consumer price index topped forecasts with a quarterly rise of 0.1 percent, to keep annual inflation steady at 1.9 percent.
Crucially, a measure of non-tradable inflation favoured by the Reserve Bank of New Zealand rose a surprisingly strong 0.7 percent in the quarter. The annual pace picked up to 2.7 percent, the fastest since mid-2014.
Yields on two-year government paper duly ticked up to 1.735 percent, from 1.71 percent, though that follows a massive rally in the past few months. They had been as high as 2.02 percent as recently as November. The rise in the kiwi gave a small lift to the Australian dollar, which had lost ground overnight as a report of problems in Sino-US trade talks soured risk sentiment globally. The Aussie was last at $0.7128, having fallen 0.4 percent overnight to as far as $0.7116. Australian government bond futures edged up as Asian equities slipped, with the three-year bond contract rising 1.5 ticks to 98.225. The 10-year contract firmed 1 tick to 97.7100.