Following Reserve Bank governor Allan Bollard's announcement, the kiwi plunged more than 1c over two hours from 78c to 76c - ending at 76.58, down 1.4c, at 5pm.
Exporting stocks having made gains at 2pm yesterday included Fisher & Paykel Healthcare, up 4.7%, Air New Zealand 2.63%, Sanford 4.1%, Nuplex 1.89%, Guinness Peat Group 1.92% and Rakon up 1.88%.
The Reserve Bank predicted the country's annual rate of inflation would leap to 4.7% for the year, well beyond its preferred maximum 3% target which has already been breached.
It held the OCR at 8.25% - where it has been since last July - remaining the highest rate in the developed world.
ABN Amro Craigs broker Peter McIntyre said while the fall in the dollar was good for exporters, it would also prompt "a lot of volatility to come" from foreign investors exiting the market.
Analyst expectations for a drop in the OCR had ranged from late this year through to the New Year, but Dr Bollard said the Reserve Bank was "likely" be able to drop rates later this year, on the proviso commodity prices, especially oil, stopped rising and inflation expectations and wages stayed in check.
Mr McIntyre said: "This is what the market is trying to factor in; when that rate will drop".
Similarly, wool sales yesterday were reported to have strengthened in most categories after being driven up by the weaker kiwi, New Zealand Wool Services International said.
Since the previous wool sale in May, the kiwi had weakened 1% against the greenback, prompting price increases between 1% and 2.5% for fine crossbred fleece, poorer style coarse fleece and shears, lamb fleece and oddments.
Mid-micron wool and average course fleece wools fell by up to 3% and 1.5% respectively.
ANZ chief economist Cameron Bagrie said the market was now "fully priced" for an OCR rate cut in September, with more than 1.4% of cuts priced in during the next 12 months.
"We continue to expect the data to show further economic weakness.
In this environment the trend in interest rates and the kiwi will remain the [financial] markets' friend," Mr Bagrie said.
Mr McIntyre said increased market volatility was likely from the foreign "carry trade" investors - those in countries who had low interest rates and instead invested in New Zealand, with its higher interest rate.
"They will be looking at getting out before the [OCR] cuts come into effect. Australia is starting to look a better bet for them at present," he said.
Manufacturers and Exporters Association chief executive John Walley said it was not the time for the Reserve Bank to be "timid" and it should consider cutting the OCR outside its planned schedule as had the US Federal Reserve recently.
While the kiwi weakened after Dr Bollard's announcement yesterday, Mr Walley said the long-term solution for the economy rested with lower interest rates, combined with a policy change and shift to encourage people to save rather than spend, which did not put speculative pressure on the exchange rate.
"Early cuts are unlikely to have much of an impact on high street [interest] rates, but the impact on the exchange rate will help an export-led response to the slow down.
"The sooner this happens the better. There is little downside to cutting sooner rather than later," Mr Walley said.
