So is this it for the high Kiwi dollar? Has it finally peaked? In the three weeks since the kiwi was nudging an all-time post-float high against the US dollar (at US88.36c) we've seen it tumble almost 3c.

At US85c we're still at historic highs but it looks more manageable. Has the spell been broken?

There are plenty of reasons why that might be the case but all the variables remain volatile.

Picking the top (or bottom) of a currency cycle is never a safe bet.


Reserve Bank Governor Graeme Wheeler last week delivered a well-timed double blow.

Despite putting the official cash rate up he sent a clear message that the bank would now pause and he warned that the kiwi was overvalued and hinted at currency intervention.

That was enough to push the dollar down on Thursday and it kept falling overnight.

It is plausible that the bank did actually intervene - selling off New Zealand dollars - to put some weight behind the words.

The bank will have recognised a window of weakness in the kiwi as lower dairy prices pushed it down and solid US corporate earnings drove confidence there and pushed the greenback up.

Once a central bank decides to exert pressure on the currency it has to do it hard and fast and ideally when it has the wind at its back.

But whether this translates into a sustained decline remains very much in the hands of the traders watching the US economy.

There's no doubt the dominant expectation is that the US will continue to recover. But the timing remains impossible to predict.

On balance so far corporate earnings season in the US has been pretty good. Leading car company Ford beat expectations and reported record US earnings.

That sort of thing has huge symbolic value. But others, such as key retail stock Amazon, have underperformed.

That's been the story of the US economy for the past few years - mixed signals. A step forward, a step back, a step sideways.

There are high hopes that recovery may hit its straps this time which would mean a rising US dollar through the later part of this year.

Markets are going to keep reacting to every detail of economic data out of the US until they get a clear signal. That signal will be moves by the US Federal Reserve to ease its stimulus programme and raise rates.

Meanwhile the kiwi is facing downward pressure from falling dairy prices - one of the big indicators for international traders looking at our economy.

But the domestic economy remains strong. The Reserve Bank will likely have to start lifting rates again around the end of this year. If the US takes another stumble before then we may yet see the kiwi testing new highs.