A weaker local currency benefits exporters because funds earned overseas convert back into more kiwi dollars than in times of currency strength, but adds to inflation pressure as it makes imported goods more expensive.
ASB senior economist Mike Jones said the kiwi had seen better days, but that it was in good company.
"At the moment, when it comes to the currency market, the US dollar is really the only game in town, across the whole complex," he said.
"The New Zealand dollar has just been part of that, and that's why we are seeing two-year lows," he said.
"It's really a case of the stronger dollar sinking all boats at the moment," he said.
"If you look at the G10 currencies, it's really a sea of red."
The commodities-linked currencies have fallen by the least against the US dollar.
"And in some sense that reflects not just commodities trends, but also the economies.
"In Europe, in particular, it seems clear that we are going to see a reasonably deep recession for the eurozone and the UK with the energy crisis that is unfolding there," Jones said.
"We are not going to see that extent of economic damage in this part of the world, so that's why the kiwi is outperforming those currencies."
Jones said the weaker New Zealand dollar is contributing to a rebalancing of the domestic economy away from the big cities and more to the regions.
"With an overall slightly stagflationary, low-growth economy we are going to see some divergence.
"In particular, the export sector and the rural economies are outperforming the main cities," Jones said.
"The kiwi and high commodities prices are a big part of that - you don't always see the NZ dollar down around these levels at the same time as commodities export prices being so strong."
Jones said the buoyant housing market "did some of the heavy lifting" during Covid-19 but that house price declines were now being led by Auckland and Wellington.
"Regional centres are not experiencing the same degree of house prices correction, so that is also contributing to the regional house price performance," he said.
BNZ senior market strategist Jason Wong expects to see more weakness in the kiwi, possibly towards US56c to US57 by the end of the year, based on heightened levels of geopolitical and economic uncertainty.
"It's one big giant mess out there at the moment," Wong said.
Covid-19 lockdowns and real estate downturn in China - historically a key driver of world economic growth - was driving the Chinese economy to its lowest point in decades.
China's downturn, combined a recession in the another big engine - Europe - was likely to lead to weaker world growth.
"The NZ dollar does not perform well in that environment and the path of least resistance is for it to keep falling, so we expect to see more downside."
Wong noted commodities prices - particularly dairy - had been slipping in recent months.
The ANZ's World Commodity Price Index fell 3.3 per cent in August, with the pace of decline accelerating in the past three months.
"Dairy prices fell a massive 8.2 per cent month-on-month in August, but there are encouraging signs that prices may lift again soon," ANZ said.
"Milk production volumes remain low in most major dairy-exporting countries, which is helping to offset the weak demand for dairy products," ANZ said.
