Currency specialists are busily downgrading their forecasts for the New Zealand dollar after the Reserve Bank on Thursday surprised the market by cutting the official cash rate to 3.25%.
In response, the dollar fell below US70c for the first time in nearly five years, touching US69.65c on Thursday night before moving back above US70c yesterday morning.
The dollar was trading at US70c at 5pm.
BNZ currency strategist Raiko Shareef said the central bank surprised with its cut on Thursday.
He believed a July cut was ''a given'' and another one in September possible.
''While the Reserve Bank forecasts a second 0.25% easing by June 2016, we believe it will be prodded into action sooner rather than later.''
The BNZ's previous NZD/USD forecasts were predicated on an OCR remaining unchanged at 3.5% for the foreseeable future, although allowing for the market to price in the risks of cuts, he said.
''Clearly, we need to lower our near-term numbers to account for yesterday's events.''
The BNZ lowered its end-2015 forecast to US68c from US70c previously while retaining its end-2016 forecast at US66c.
There were no major changes and they would have been smaller had the ''positive beat'' emerging from the US data not been taken into account, Mr Shareef said.
The Reserve Bank's policy change raised the BNZ's forecast for the NZD/USD low in the current economic cycle.
Mr Shareef had previously expected the NZ dollar to underperform materially through late 2016 and early 2017 as growth slowed to below trend.
Now, with the Reserve Bank adding its weight to pushing the dollar lower, it would likely be faced with inflation racing towards the 2% target in a year's time, leaving the market inclined to price in the possibility of rate rises in 2017.
''As such, we see the cyclical low of US66c to be reached by mid-2016 as opposed to US65c by mid-2017. Currency markets remain particularly volatile. We'd be equally unsurprised to see the dollar print below US69c or above US73c in the coming weeks.''
