Reserve Bank action pushes kiwi down

THE New Zealand dollar dropped to a two-week low after the Reserve Bank confirmed its first intervention in currency markets for six years.

The kiwi fell as low as 83.62 US cents, trading at 83.97 cents at 5pm from 84.55 cents at 8am and 84.94 cents on Tuesday.

The trade-weighted index dropped to 77.66 from 78.58.

Central bank governor Graeme Wheeler told a parliamentary committee that the bank had intervened in currency markets to "potentially take the tops off rallies".

He didn't provide any details, though deputy governor Grant Spencer said the action would show up on the bank's balance sheet.

"I think you'd assume it's bigger than usual," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional in Auckland.

"The kiwi's at the bottom end of the range after failing to go through."

Mr Wheeler's comments followed an earlier lament about the strength of the currency at the release of the bank's six-monthly financial stability report, where he warned about the strength of the housing market and its threat to the financial system.

The NZ central bank comments follow the Reserve Bank of Australia's decision on Tuesday to cut its target cash rate a quarter-point to 2.75 per cent to stoke economic growth, citing the country's lower than expected pace of inflation and strong exchange rate.

The kiwi fell to 82.43 Australian cents from 83.50 cents on Tuesday.

The kiwi also fell to 64.13 euro cents from 64.92 cents and to 83.126 yen from 84.15 yen.

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