It was trading at 68.28 US cents at 5pm in Wellington from 68.93 at 8am. The trade-weighted index was at 74.17 from 74.30.
"There's been some news hitting the wires that they've found a second species of fruit fly in Auckland," says Mitchell McIntyre, a dealer at XE.
New Zealand is officially otherwise free of fruit flies. Were the pest to become established here, it could devastate horticulture
The fly from the new species, a facialis fruit fly and native of Tonga, was found in Otara and formally identified on Monday.
Biosecurity Minister Damien O'Connor says the second find is disappointing and the government is committed to ensuring it doesn't establish here.
"Getting rid of the fruit fly is New Zealand's most well-oiled biosecurity response. We've been here several times before and each time we've successfully got rid of this horticultural pest," O'Connor says.
The Ministry for Primary Industry has set 7,500 traps to catch any flies around Auckland.
McIntyre says the market had tried to rally earlier but the RBA's gloomy comments hit the Australian dollar and dragged the kiwi down as well.
The RBA said the house price falls so far are large by historical standards but should have only a small economic impact.
However, if house prices were to fall much further, that could weaken consumption and GDP, making the situation a "key uncertainty" for monetary policy.
Like New Zealand's Reserve Bank, the RBA has said the next move in interest rates could be either up or down, depending on how the risks play out.
The New Zealand dollar is trading at 95.99 Australian cents from 96.03, at 52.93 British pence from 52.97, at 60.44 euro cents from 60.56, at 75.42 yen from 75.74 and 4.6252 Chinese yuan from 4.6337.
The two-year swap rate is at 1.9109 per cent from 1.9117 on Monday; the 10-year swap rate is at 2.5100 per cent from 2.4950.
