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NZ dollar falls after Key talks it down

07:00 AEST Wed Aug 8 2012
AAP
The kiwi dollar has fallen after comments from PM John Key yesterday (Getty)
The kiwi dollar has fallen after comments from PM John Key yesterday (Getty)

The New Zealand dollar fell more than half a US cent after Prime Minister John Key indicated the kiwi has room to fall and its current strength could stifle the local economy.

The New Zealand dollar fell to 81.46 US cents at 8am from 82.02 cents on Tuesday at 5pm. The trade weighted index decreased to 73.22 from 73.54.

Mr Key told Bloomberg that one-way bets on continued strength in the New Zealand dollar were "not a very smart thing to do". He also said the high dollar "takes the pressure off the Reserve Bank" to raise rates.

"So the fact the New Zealand dollar spent most of this morning on the back foot likely reflects a delayed reaction to some comments from Prime Minister Key last night," said Mike Jones, market strategist at Bank of New Zealand.

Mr Key's comments were unlikely to have been an attempt to influence the central bank and "from this perspective, the falls in the NZD/USD look to be an overreaction," Mr Jones said.

The kiwi fell to 77.23 Australian cents from 77.49 cents on Tuesday after the Reserve Bank of Australia left its target cash rate unchanged on 3.5 per cent.

The New Zealand dollar fell to 65.73 euro cents from 66.19 cents on Tuesday and declined to 64.07 yen from 64.20 yen.