The Reserve Bank sold about $250 million worth of New Zealand dollars in April, the highest amount in five years.
In a speech on Thursday morning, Reserve Bank governor Graham Wheeler repeated that the central bank is prepared to sell the kiwi to contain what he calls an overvalued currency.
The Reserve Bank sold $256 million of New Zealand dollars to try to dampen the rising currency.
It is the largest amount sold since May 2008, although economists say it is not very much and unlikely to have had much effect.
Graeme Wheeler told the Institute of Directors in Auckland that the bank had taken steps to dampen down the dollar.
Mr Wheeler said the currency is overvalued, but the bank will not intervene aggressively to lower the exchange rate. Instead, it will scale up operations to sell the kiwi if there's an opportunity to have greater influence.
He also expressed concern about an emerging housing bubble in Auckland, saying it could damage the financial system if it bursts.
However, he is hesitant about lifting interest rates to dampen the housing market, saying that could further lift the exchange rate and harm exporters.
Mr Wheeler said the use of new macro-prudential tools could take some heat out of housing, though he admits it's no panacea.
He said the high exchange rate and housing market presents the bank with difficult challenges for monetary policy, when both appear to be overvalued and investor demand is expected to remain strong.
Macro-prudential tools 'toothless tiger'
Head of Asia-Pacific Research at TD Securities, Annette Beacher, said the Reserve Bank is giving no clear policy direction on what it's going to do about over-valued house prices and the strong New Zealand dollar.
Ms Beacher had been expecting a $1 billion sell-off of New Zealand dollars rather than the $256 million worth sold last month.
She said the relatively small amount sold leaves the market wondering whether the Reserve Bank is serious about intervening.
"To me it means from here on in any discussion about 'we stand prepared to intervene', the markets are just not going to believe them and therefore any subsequent discussion is not going to dampen the currency like it has in the past."
She believes macro-prudential tools are a toothless tiger and is not convinced they will make much difference to the housing market.
Ms Beacher said it's likely a lot of people will take advantage of low interest fixed rate mortgages increasingly being offered by banks.
She said by the time the Reserve Bank decides to increase the interest rate it will have much less impact on the average household because they will have already fixed their mortgage at a low rate.
Westpac chief economist Dominick Stephens also says the tools the Reserve Bank has available to try to dampen the housing market are unlikely to have much effect.
Mr Stephens says restricting the proportion of loans to people with small deposits may simply send them to other lenders.
He says the solution lies with a recovery in the US dollar which is keeping the New Zealand dollar over-valued, but that is not likely to happen soon.