June 18 (Bloomberg) -- The New Zealand dollar dropped from a 19-year high against the yen as the nation's third-largest lender said the central bank intervened in the foreign-exchange market.

The Reserve Bank of New Zealand sold its currency today, said Danica Hampton, a currency strategist at the Bank of New Zealand Ltd., which handled some of the trades. The central bank has ``no comment,'' spokeswoman Anthea Black said by telephone from Wellington. The local dollar fell as much as 0.7 percent against the yen and U.S. currencies.

``They're sending a message: Don't mess with us,'' Hampton said. The Reserve Bank sold a ``large quantity'' of the currency, she said, declining to reveal the amount.

The Reserve Bank may be intervening after the first sale it has announced since 1990 a week ago failed to drive down the currency. The New Zealand dollar has risen 18 percent against the currencies of its major trading partners in the past year, as investors borrowed at the Bank of Japan's 0.5 percent overnight lending rate to buy debt in New Zealand in so-called carry trades. The gains prompted some exporters to shift manufacturing to China.

The local currency fell to 93.08 yen at 2:45 p.m. in Wellington, from as high as 93.23 and 92.90 yen when the central bank last intervened on June 11. It bought 75.36 U.S. cents after reaching 75.53 today.

Against a trade-weighted index, it was at 73.57 from as high as 73.76 today and 74.48 on June 11.

Less Impact

``The RBNZ's focus is on the New Zealand dollar trade- weighted index rather than the kiwi-U.S. dollar,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``You should be wary on any levels up toward the recent intervention.''

The bank confirmed it sold New Zealand dollars a week ago, saying the currency had risen to levels ``unjustifiable'' by the economic fundamentals. That was the first intervention announced by the central bank since it set up a fund for stabilizing the currency in 1990.

``I'm convinced they've intervened,'' said Alex Sinton, senior currency dealer at ANZ National Bank Ltd. from Auckland. ``It's now gotten very dangerous for the bank, because at this point the impact of this intervention has been less than the last one.''

New Zealand's dollar has surged 22 percent against the U.S. currency in the past 12 months, more than the Brazilian real's 17 percent gain. A rising local dollar erodes earnings for exporters such as meat processors and dairy farmers, who make up 30 percent of New Zealand's $102 billion economy.

Economic Growth

New Zealand's economy will grow 3.1 percent in the year ending March 31, 2008, from 1.7 percent a year earlier, the central bank said in economic forecasts released June 7, the day it unexpectedly lifted its benchmark rate.

New Zealand's dollar gained to 76.39 U.S. cents on June 11, the highest since being allowed to trade freely in March 1985. Central banks intervene in the market when they buy and sell currencies to influence exchange rates.

The June 11 intervention pushed down the New Zealand dollar 1.1 percent last week, the biggest loss in more than three months.

Japanese individual investors, who have set up 600,000 accounts to trade currency with borrowed yen, stepped up purchases of the New Zealand dollar after the June 11 intervention.

``We wouldn't be too bearish on the kiwi just because the RBNZ is selling into strength,'' said RBC's Trinh. ``Appetite for yield remains strong. The risk for further RBNZ tightening in the third quarter remains high.''

Margin Traders

The currency has soared 31 percent against the yen in the past year. The carry trade became more popular after the central bank on June 7 unexpectedly raised the official cash rate a quarter percentage point to a record 8 percent, 7.5 points higher than the Bank of Japan's overnight lending rate.

Margin traders' net long positions in the New Zealand dollar against the yen doubled to $347 million on that day from $180 million on June 8, according to data from the Tokyo Financial Exchange. Long positions are bets a currency will rise. A carry trade that bought the New Zealand dollar funded with yen would have returned 14 percent this year.

New Zealand's dollar pared losses, rising from as low as 75.00 cents. Unless the Reserve Bank intervenes in the currency again, it is likely to ``grind higher'' today, said John Horner, currency strategist at Deutsche Bank AG in Wellington.

```The currency continues to remain strong, reflecting the continued demand for high-yielding product, particularly from Asian retail re-investors,'' he said. ``It does not appear at this stage that the RBNZ has limited that demand.''

The Australian dollar, another favorite for carry trades, climbed to a 15 1/2-year high against the yen of 104.07, from 103.95 on June 15. The Bank of Japan's benchmark rate is 5.75 percentage points less than Australia's. The yen slid 0.1 percent to 123.53 per dollar.

`More Bang'

The bank would have got ``more bang for its buck'' by intervening on a Monday morning because Australian and Japanese traders are not yet active and the local market is only just getting in, Hampton said.

New Zealand government bonds fell. The yield on the benchmark 10-year note rose 1 basis point to 6.82 percent, according to data compiled by Bloomberg. Bond yields move inversely to prices. The one-year swap spread gained 1 basis point to 2.93 percent.

To contact the reporter on this story: Emma O'Brien in Wellington at eobrien6@bloomberg.net.

Last Updated: June 17, 2007 22:58 EDT