Alan Bollard's attempt to push the kiwi lower has not deterred Japanese investors, who yesterday stepped up their buying of the currency after the Reserve Bank's invervention in the foreign exchange market.
Japanese retail investors - whose buying of the New Zealand dollar in recent years has helped push the currency to record highs - are also expected to buy more of the kiwi in the coming months as the improving Japanese economy increases their appetite for risk.
Masafumi Yamamoto, currency economist at Nikko Citigroup in Tokyo, said many saw the intervention as an opportunity to get more kiwi for their yen, despite the currency still being near record highs.
"They wanted to buy the high-yielding currency, but the level has been elevated so they were kind of hesitant to enter into the market, but thanks to the authority in New Zealand they found an attractive level to buy the kiwi," Yamamoto told the Business Herald.
"Japanese retail investors were buying the New Zealand dollar just after the intervention, so they were not discouraged by the intervention."
After the Reserve Bank chief intervened in the foreign exchange market by selling an unspecified amount of New Zealand dollars on Monday, the kiwi dropped to US74.81c by early evening, from US76.19c earlier that day.
But by yesterday it had recovered somewhat, trading between US75.02c and US75.37c.
Despite the kiwi regaining some ground, Bank of New Zealand currency strategist Danica Hampton said, "On the day you'd have to argue it [the intervention] was effective".
She said the Reserve Bank was responding to the kiwi's sharp rise on Friday night in New York trade, when it hit a 22-year high of US76.40c.
Intervention "was about signalling that when the kiwi dollar rallies without the support of global markets and for seemingly unjustified reasons that was inappropriate".
"Whether or not intervention can ever bring any long-term relief to exports or people who are hurt by the currency is another question, but I don't think that's what it was about," she said.
"They have definitely given the market pause and people are really thinking before they jump into buying the kiwi dollar."
But Hampton said demand from Japanese investors would continue, particularly as Japan was in the middle of the June "bonus season".
Ryousei Ishida, senior vice-president of foreign-exchange options at Mizuho Corporate Bank in Tokyo, also expects intervention to have a limited effectiveness - unless Bollard decides to intervene again.
"The topside looks limited at the moment, but on the other hand the central bank is considering another rate hike because of New Zealand's very strong economic situation," he said. "So I think maybe after another corrective move the New Zealand dollar may go up again."
Yamamoto said New Zealand's high interest rates would remain the focus for Japanese investors and intervention was unlikely to dent their appetite for the currency.
New Zealand-dollar uridashi bonds, for instance, carry an interest rate of more than 7 per cent, compared with a deposit rate of 0.21 per cent at Japan's Post Office Bank.
"The New Zealand economy is very strong and yields are very high in New Zealand so people think that there's no strong reason to believe that the depreciation of the Kiwi will continue," he said. "Intervention will not be enough to change people's minds."
Yamamoto said Japanese investors would likely increase their buying of kiwi investments - uridashi bonds, funds investing in New Zealand and speculative currency instruments - thanks to the stronger local economy.
Stable wages and a stable unemployment rate are prompting investors to put the money into higher-risk investments, such as equities and foreign currency assets.