Pressure is mounting in the marketplace for a cut to New Zealand's interest-driving official cash rate (OCR), which has already been sitting at an historic low of 2.5% for the past 14 months.
Wavering global economies, principally some European nations and the United States, have undermined sharemarkets and commodity prices around the world and the US blue-chip S&P 500 index is at a two-month low.
Amid the escalating fiscal crisis in debt-laden Greece, where analysts are picking it may exit the euro currency by June, the New Zealand dollar has hit a four-month low of US78.43c, with estimates of further declines, to between possibly US75c-US77c.
While New Zealand exporters will breath a sigh of relief from the sharply falling kiwi, which has been scouring hard-won profit margins, in the medium term the decline raises the likelihood of increasing domestic inflation for the Reserve Bank to consider.
ASB economist Jane Turner said overseas market confidence deteriorated over the weekend.
There was a combination of disappointing US employment figures, alongside renewed uncertainty around the Eurozone debt crisis, following the weekend's French election results and lack of agreement over forming a new Government in Greece.
"This adds to last week's decline in the New Zealand dollar as the market reassessed New Zealand's fundamentals in light of the continued fall in dairy prices and weak employment result," she said.
"Given the uncertainty in Greece, with the lack of an election result, we expect the kiwi will remain under pressure in the near term and expect it to head down towards US77.20c," she said.
BNZ economist Doug Steel said in the face of lower commodity prices, and, until last week, the strong kiwi, the marketplace was "looking for a [OCR] cut in the near term".
As with some other analysts, the BNZ was now pushing out expectations of an OCR change towards the end of the year or early 2013.
During the next two weeks there would be further marketplace expectations of a cut.
Retail trade figures were "likely to be weak" and the Budget would be tight, followed by Fonterra's update on its pay-out, Mr Steel said.
"The Reserve Bank will be wanting to keep its options open," he said.
The kiwi could fall to US75c, but in the medium term, the country's growth outlook from rising residential sales and construction gains would reverse the decline, he said.
Craigs Investment Partners broker Peter McIntyre said investors' attention was "dominated" by the future of the European monetary union.
European stocks were tumbling, US stocks were down and Asian shares up slightly, but capped by on-going European concern.
Forsyth Barr broker Peter Young said stocks fell amid the deepening of the European debt crisis and Greece's inability to form a government.
A coalition of left-wing parties is vying for control and concern is rising in the European Union, as the coalition's platform includes nationalisation of banks, the repeal of recent labour reforms and the cancellation of bail-out agreements.
Greece has already received two financial bailouts to keep its economy solvent, but analysts are picking the other European countries and the International Monetary Fund will not give more and Greece will run out of cash.
Ms Turner believed a Reserve Bank cut to the OCR was "unlikely" in the present low inflation environment and the bank could "easily afford" to leave it untouched.
However, if the Reserve Bank ignored the medium-term threats to inflation now, it "could make reining in inflation pressures much more difficult in future", she said.
During the coming months, the Reserve Bank has a tough task of balancing the weaker global growth outlook and weak New Zealand export sector against strength in the local housing market and the future inflationary impacts of the Canterbury rebuild, she said.
