New Zealand fuel prices are already at record highs, partly because of the weakened New Zealand dollar, and further weakening will result in households and many businesses being hard hit in the months ahead, in a variety of ways.
Since May the foreign exchange cross rate has plunged from US75c to just above US64c yesterday, as the US economy goes from strength to strength.
Craigs Investment Partners broker Chris Timms said the US dollar strength looked set to continue.
The US central bank, the Federal Reserve, was in a ``raising cycle'' with its three upward interest rate moves, plus recent positive economic data, including near 50-year lows in unemployment and more than 130,000 new jobs last month, he said.
``The US [dollar] should strengthen further from here, which means further weakening for us.''
Some analysts have suggested the 2018 average could go as low as US62c for the calendar year.
Mr Timms said the cross rate would have to ``drop fairly rapidly'', given there was less than three months of the year to go, to average out at US62c.
``[However] there's nothing in sight to strengthen us against the US dollar,'' he said.
Craigs was maintaining a forecast range of US61c-US66c for the year.
While the country's exporters and people with overseas investments would be gaining, costs would mount for importers, including fuel importers.
The increased costs of imported goods would ``in time'' flow through to retailers and some transport companies, then eventually to the consumer.
``For the likes of Mum and Dad, it's fuel prices and groceries; then given the flow through [later], cars, whiteware and appliances.
``Costs will eventually be passed on to the consumer.''
Analysts have predicted some respite may be on the way after China's central bank announced a steep cut in the level of cash its banks must hold in reserve; which is estimated to free up $US175billion ($NZ272billion) to shore up the faltering Chinese economy.
The freeing up of cash would be good for New Zealand exporters, given China was the country's largest trading market.
However, countering that boost is a current review by the Chinese Government of its cross-border e-commerce channels, which was already having negative impacts for some Kiwi exporters.
``That in itself is already causing a lot of uncertainty,'' he said.
ASB chief economist Nick Tuffley said the ``key catalyst'' for the kiwi's decline of 2.7% against the greenback last week was the sharp increase in the US Treasury bond yield, which hit a seven-year high interest rate of 3.23% last Friday.
``Further upward pressure on US Treasury yields is likely to see the New Zealand dollar-US dollar test new lows ... which could be US63.5[c] this week,'' he said.
Mr Tuffley said he had a stronger US dollar outlook, given solid US growth outlook, its higher terms of trade and weaker outlooks for the Chinese and emerging markets.
