The New Zealand dollar eased after the Reserve Bank kept its official cash rate unchanged at 2.5 per cent and delivered a more balanced message than the market had expected.
Contrary to expectations, there was no mention of macro-prudential tools, such as loan to value ratios - which the bank expects to use to try to take the heat out of the property market.
The currency fell to US79.33c just after the statement's 9 am release from US79.71c just before. By late morning the currency had regained ground US79.50c.
The Kiwi's weakness followed an explosive trading session overnight, which saw the currency rally by 1.3 per cent - making it the strongest performers among its peers.
Sam Tuck, senior manager FX at ANZ New Zealand, said the statement was more even-handed than the market had expected. "There was a thought that maybe they would be a little bit more hawkish - perhaps by raising forecast bank bill track next year - to reflect the better New Zealand data that we have seen," he said.
As in March, the Bank's 90-day bank bill projections were consistent with the official cash rate being lifted in mid-2014. However, the profile was slightly more aggressive from mid-2015.
Westpac economists said they were surprised the possibility of restricting high loan-to-value mortgage lending did not receive more attention in the monetary policy statement.
"This is probably simply due to the unconfirmed nature of the possible regulations - the Reserve Bank does not want to tie its hands at this stage," Westpac said.
ASB said it appeared that the bank wanted to keep its macro-prudential tools "segregated" from its monetary policy discussions.
In its monetary policy statement, the Reserve Bank said it expected its official cash rate to stay at 2.5 per cent until the end of the year.
Governor Graeme Wheeler said that despite the New Zealand dollar having fallen in the past few weeks, the currency remained overvalued - hindering exports while encouraging imports.
The bank expected economic growth to accelerate to 3.5 per cent by the second half of 2014 and for inflation to rise towards the mid-point of its 1 to 3 per cent target band.
Wheeler said the global outlook remained mixed with disappointing data in Europe and some other countries, and more positive indicators in the United States and Japan.
Global financial sentiment continued to be buoyant and the medium term outlook for New Zealand's main trading partners remained firm, he said.
The official cash rate has not changed since March 2011. ASB expects the central bank to keep the rate on hold until March 2014.