The kiwi dollar fell slightly yesterday as traders remained nervous about the Reserve Bank intervening in the currency market again.
The currency was just above US75c at the local close yesterday, down a little from Tuesday's close of US75.30c.
But trade was quiet and the modest fall inthe kiwi yesterday may have had more to do with a stronger US dollar than the Reserve Bank's intervention on Monday.
"Buyers have been more tentative after the Reserve Bank's action and the US dollar strengthening up as it has done has helped the scenario," said ANZ currency dealer Alex Sinton.
Helping to keep a cap on the kiwi was a stronger US dollar, which climbed against the yen and the euro as higher bond yields in the US attracted investors.
After Reserve Bank Governor Alan Bollard took the the unprecedented step of intervening in the foreign exchange market on Monday, the kiwi dropped to US74.81c by early Monday evening, from US76.19c earlier that day.
Since then the kiwi has traded under US75.50c, some way below the record high of US76.40c on Friday night.
RBC Capital Markets currency strategist Sue Trinh said: "The market is still treating the kiwi with a lot of caution following the intervention this week." Nonetheless she said the intervention would not necessarily stop the New Zealand dollar climbing again to Friday night's high.
Nor would hitting a fresh high against the US dollar necessarily prompt more intervention from the Reserve Bank.
"But if the kiwi rallies in a disorderly fashion - and by that I mean a few per cent in very quick order - the RBNZ will be expected to lean against that," she said.
The Reserve Bank would be paying close attention to the trade weighted index - a notional index comprising a basket of currencies of New Zealand's trading partners.
Trinh said a TWI of 74 appeared to be the Reserve Bank's "line in the sand". Yesterday the TWI was around 73.20.
