The New Zealand dollar tumbled today after rumours, then confirmation, that the Reserve Bank had intervened in the currency for the first time since it was floated in 1985.
The central bank sold NZ dollars today following Friday's surge above US76c, in relatively thin trading with an Australianpublic holiday.
The kiwi fell 1.7 percent from its peak to a low of US75.07c as dealers dumped the currency on the intervention rumours, before it recovered a touch late afternoon.
The currency has been trading at post-float highs in the wake of three consecutive interest rate rises by the Reserve Bank, raising its yield above that offered by other industrialised countries' currencies.
Most economists polled by Reuters do not expect interest rates to fall until mid- to late 2008.
Adding to fuel for a further rate rise was unexpected strength in the housing market shown in this morning's Quotable Value figures, and a 2 percent rise in first quarter terms of trade.
By 5pm, the kiwi was at US75.35c from US75.47c late on Friday afternoon. Against the aussie, it was little changed at A89.57c from Friday's A89.52c, but below the session high of A90.52c.
The kiwi also lost ground against the yen, dropping to 91.67 yen from a 17-year high just below 93 yen on Friday.
The ANZ bank today said the rise in the NZ currency came as supply evaporated and illiquid conditions kicked in.
US dollar strength off the back of a lower trade deficit had failed to dent the kiwi.
Despite sharp rises in US yields during the past week, New Zealand interest rates had gone up even more, ANZ said.
The US dollar was little changed against the euro and the yen, holding onto gains versus the euro after hitting a two-month high late last week when the benchmark US Treasury yield jumped to its highest level in around five years.
NZ dlr/US dlr US75.35c US75.47c
NZ dlr/Aust dlr A89.57c A89.52c
NZ dlr/euro 0.5644 0.5623
NZ dlr/yen 91.67 91.52
NZ dlr/stg 38.30p 38.15p
NZ TWI 73.42 73.32
Australian dollar US84.13c US84.32c
Euro/US dollar 1.3351 1.3424
US dollar/yen 121.68 121.28
