Dollar still at 'unjustifiable', 'unsustainable' levels, RBNZ says

Traders in the local currency are sensitive to suggestions that the Reserve Bank may intervene in the market to lower its value. Photo / Mark Mitchell.

New Zealand's Reserve Bank reiterated that the local currency is at "unjustifiable and unsustainable levels", conditions that need to be met for it to intervene in the foreign exchange market.

Headwinds to New Zealand economic growth include a softening in the Chinese and Australian economies, a sharp fall in dairy incomes and "the persistence of the New Zealand dollar at unjustifiable and unsustainable levels", the central bank said in its 2015-2018 Statement of Corporate Intent.

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The New Zealand dollar fell to as low as 68.56 US cents, from 68.83 cents at 9:40am prior to the publication of the statement. It was recently trading at 68.91 US cents, following better-than-expected merchandise trade figures for May.

Traders in the local currency are sensitive to suggestions that the Reserve Bank may intervene in the market to lower its value, actions governor Graeme Wheeler has taken in the past.

On June 11, Wheeler welcomed the recent depreciation in the currency, though said it was still overvalued and that its depreciation still "has a significant way to go." The local currency has dropped more than 9 per cent since the start of May as traders began pricing in local interest rate cuts.