The New Zealand dollar hit a six-month low against the greenback last night, and a bank strategist says more bad news on Europe's debt crisis this week could push the kiwi even lower.
The currency was trading at US76.39 just after midnight yesterday and fell to US75.74 just before 5pm.
BNZ currency strategist Mike Burrowes said markets were awaiting news this week on whether debt-sodden Greece would receive its latest bailout payment, as well as an interest rate decision from the European Central Bank.
"There's no shortage of stuff that's going on offshore that will keep trading on the currency quite volatile," he said.
"I think this week or over the next month the risks [point] to a further escalation in the European debt crisis. It does seem like the inevitable outcome is that we have Greek default."
Burrowes said a default in Greece could drive a sell-off in risk-linked currencies such as the New Zealand dollar, pushing the kiwi below US75c.
Greece's deficit this year is expected to reach 8.5 per cent of gross domestic product, rather than the 7.8 per cent that had been hoped for, the country's Finance Ministry announced yesterday.
Westpac has been giving an even more bearish outlook on the New Zealand dollar, with market strategist Imre Speizer predicting the kiwi will head to about US72c over the coming months.
Burrowes said last week's double credit downgrade of New Zealand by ratings agencies Fitch and Standard & Poor's was not forgotten, but did not have big implications for the currency.
The dollar's fall means overseas fans arriving in the country for the Rugby World Cup now have a bit more cash in their pockets than they did at the start of the tournament.
Since the event began the greenback has risen more than 9 per cent against the kiwi, while the euro has gained 5.4 per cent and the British pound more than 7 per cent.
Tourism Industry Association chief executive Tim Cosser said the fall in the New Zealand dollar's value against those currencies might encourage fans to spend a little more.
"We've certainly got evidence of that," he said.
But Cosser said the situation in visitors' home economies tended to have more of an impact on how much they spent than exchange rates.
"Overall, for export industries a slightly lower dollar is favourable," he said.
"But then the price of fuel can get pushed up a little bit as well."
Inbound Tour Operators Council president Brian Henderson said tourism businesses had been suffering from the impact of a strong New Zealand dollar for some time, and would be happy to see it weakening.
The New Zealand sharemarket fell yesterday, with the benchmark NZX-50 index falling more than 1 per cent in early trading, before recovering to close down 0.83 per cent.
Kevin O'Sullivan, head of financial markets at Auckland's OMFinancial, said the local market was reacting to the steep falls seen on US and European equity markets on Friday, rather than any domestic news.
Australia's S&P/ASX200 index closed down 2.78 per cent yesterday.