The New Zealand dollar fell against the yen after the Bank of Japan announced additional monetary stimulus measures that were more modest than some in the market were expecting, driving up its currency.

The kiwi fell to a three-week low of 73.10 and was at 73.33 yen at 5pm, from 74.45 late on Thursday, after the Bank of Japan kept its policy rate at -0.1 per cent while almost doubling its target for purchases of exchange-traded funds. The currency traded at US70.88c, down from US71.11c on Thursday. The kiwi is heading for a 1.1 per cent weekly gain.

Speculation had grown about the size of the BOJ's stimulus measures, including cutting its policy rate more deeply negative, after the government on Thursday unveiled a larger-than-expected 28 trillion fiscal package. But the BOJ's statement shows a clear determination to keep rates on hold, with a 7-2 majority vote, disappointing those in the market expecting greater efforts to revive Japan's economy and drive inflation back up to a target of 2 per cent.

"The Bank of Japan has got a history of disappointing the market," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.


"The market probably got a bit carried away."

Running through to the close of trading in New York, the kiwi may be underpinned by demand from fund managers making month-end adjustments to their portfolios, Kelleher said.

The trade-weighted index fell to 75.74 from 76.02 late on Thursday. New Zealand's two-year swap rate fell about 2 basis points to 2 per cent, near a record low, and 10-year swaps fell 3 basis points to 2.41 per cent.

The local currency slipped to A94.21c from A94.42c on Thursday and fell to 4.7135 Chinese yuan from 4.7366 yuan.

It dropped to 63.95c from 64.25c on Thursday and decreased to 53.77 British pence from 53.93p.