Exporters could finally get some sustained exchange-rate relief, with predictions the New Zealand dollar could settle below US65c.
The dollar reached a new 11-month low of US68.85c at 5pm yesterday, down from US69.70c 24 hours earlier.
The last time it fell this low was last September 10, when it hit US68.82c before returning to US70c, above which it had since stayed.
Bank of New Zealand chief economist Tony Alexander said - unlike during currency depreciations since 2004 - weaker economic conditions and the Reserve Bank of New Zealand's (RBNZ) easing of the official cash rate (OCR) meant the dollar was unlikely to rebound to previous levels.
"Previous falls in the exchange rate have not been sustained because interest rates have not been cut by the Reserve Bank. But this time they have. This one will stick," Mr Alexander said.
He forecast the currency settling at between US60c and US65c in about a year's time.
A further fall would require significant gloomy news.
New Zealand Manufacturers and Exporters Association chief executive John Walley said exporters had been hit hard by several years of an overvalued exchange rate, forcing businesses off shore and others to contract their activities.
The easing was timely as the country's main export season was starting.
Fonterra's chief financial officer Guy Cowan said that, while the weakening dollar was generally good news for exporters, it had been expected and already factored into the company's forecast payout.
"While there is a positive flow-on from the lower NZ dollar, this is really just helping counterbalance the softening we're seeing in commodity prices.
"It's good to see the currency moving in the right direction but, at this stage, from a payout perspective, one's largely cancelling the other out."
Rabobank reported the price to exporters of dairy commodities rose 4% in July on the back of the falling dollar.
Meat companies in July forecast lamb prices to farmers for the coming season at over $70 a lamb, a lift of $20 on last year because of better market returns and the easing currency.
That was calculated on a US75c exchange rate, and they now picked the price to be close to $80, with sources saying that at US60c, the price could rise to $100 a lamb.
Mr Alexander said the exchange rate was easing because of cuts to the official cash rate and signals from the RBNZ that further cuts were likely; weak New Zealand economic data; weak Australian commodity prices bringing the Australian currency down against the US dollar; and a generally stronger US dollar.
Japanese traders dumping New Zealand and Australian dollars in expectation of further cuts in the OCR and concern at easing oil and gold prices had also helped push the dollar lower.
Mr Alexander said the lower dollar was good news for exporters and the economy in general, which needed an injection of sustained export-led growth.
"Yes, it is a good thing, even though the price of imported products is likely to rise."
It was important New Zealand increased its productive base through exports, he said.
For three decades, the contribution of exports to gross domestic product had stalled at about 30%, compared with the OECD average, which had increased from a level of 30% to 45% over the same period.
Regions would be the first to see an upturn on the back of higher prices for primary products, with the boost reaching Christchurch, Wellington and Auckland in about 18 months.
The initial gains may take some time to be felt, as export hedging lapsed and higher airfares and weak offshore economies impacted on tourism.
Current buoyancy in the dairy sector meant there would be no immediate boost, but the benefits from better sheep and beef prices would be felt.
Mr Alexander said, outside its mining and mineral centres, the Australian economy, which accounts for more than half of New Zealand's manufactured exports, was flat, limiting gains in the manufacturing sector.
He doubted the RBNZ would cut the OCR to 4.5%, its starting rate in 1999, but settle between 5.5% and 6.5%.
It is now 8%.
"I don't think the inflation outlook is so wonderfully low that the official cash rate will go below 5.5%."
Mr Walley said, while it was important for exporters to perform well, it would be difficult as some had shifted activities offshore or concentrated on the domestic market.
However, the improved conditions came as world economies were weakening.
"While it is looking better, there are dark clouds around."
