The New Zealand dollar, the current darling of foreign exchange investors, got crushed on Thursday as the country's central bank warned against the currency's strength following its decision to hike interest rates for a fourth time in 5 months.
The Reserve Bank of New Zealand [RBNZ] labeled the level of the kiwi dollar "unjustified" and "unsustainable," giving rise to expectations that it may intervene in markets to weaken the currency.
That sent the kiwi dollar hurtling down 1.2 percent against the U.S. dollar to $0.8594.
"The outsized reaction in the New Zealand dollar has come from the use of the word 'unjustified' in describing the strength of the currency," said Ray Attrill, co-head of FX strategy at National Australian Bank.
"Unjustified" strength is one of four criteria the central bank has mapped out to rationalize any intervention in the foreign exchange market.