KEY POINTS:
The BNZ's chief economist believes the Reserve Bank's currency intervention to bring down the value of the New Zealand dollar, could be a futile gesture.
The bank is believed to have bought up US dollars and sold New Zealand dollars for the second time in a week, causing the kiwi to drop about half a cent against the American dollar this morning.
At one point it was down to 75 US cents, but it is now back up to 75.24.
The bank is yet to confirm it has stepped in but the BNZ's Tony Alexander says it will not be the last time it takes action.
He claims the Reserve Bank is trying to train the markets into believing it is there to prevent any further appreciation but he says that is an experiment that will ultimately fail.
Against the yen the kiwi fell from above 93.10 to below 92.60, having hit 93.25 early Saturday, the highest level against the Japanese currency since 1987.
Market sources told NZPA the Reserve Bank had actively traded this morning to bring the NZ dollar down.
But, unlike last week when the Reserve Bank confirmed its move, today a spokeswoman said the bank had no comment to make.
Currency traders spoken to by finance media company Bloomberg were 99 per cent certain the Reserve Bank was behind the move.
"They're sending a message: don't mess with us," said Danica Hampton, currency strategist at Bank of New Zealand in Wellington.
"The bank thinks that if it broke above 75.50 cents that it could potentially go a lot higher, so it's a bit of pre-emption in that sense", she told Bloomberg.
Early Saturday the NZ dollar topped US75.50c, its highest level since the Reserve Bank intervened last Monday.
Last week's afternoon intervention was the Reserve Bank's first in the market since the NZ dollar was floated in 1985, and came after the currency had hit a post-float high around US76.40c early the previous Saturday (NZT).
By selling NZ dollars and buying US dollars, the central bank pushed the kiwi down last week from around US76.25c to US75.30c within half an hour.
For much of the rest of the week the kiwi stayed within quarter of a cent of the US75c level but early Saturday morning made the sharp move up to US75.50c.
The Reserve Bank move today was seen as pre-emptive to stop the currency moving through technical levels towards US76c.
The NZ dollar's gains on Friday night and early Saturday came as investors remained attracted by this country's interest rates which are the highest in the industrial world.
The kiwi was also bolstered offshore as the US dollar slipped on tame inflation data and as the Bank of Japan left rates unchanged.
- NZPA, NEWSTALK ZB
