The US dollar recovery started in mid-April. A stronger US dollar acts like a tightening in global financial conditions and this is having a negative effect on emerging markets.
BNZ senior market strategist Jason Wong said there had been some spillover into commodity currencies like the Australian and New Zealand dollars.
In China, a weaker credit environment and signs of weaker growth were also evident, hindering the outlook for commodity prices and currencies should those trends persist.
Stronger New Zealand commodity prices, and still-high levels of risk appetite, had supported a US71c to US72c range for the BNZ's short-term fair value model estimate for much of the year, he said.
Any support factors for the New Zealand dollar could easily give way should the global growth outlook deteriorate.
"US-China trade tensions have escalated recently following the imposition of import tariffs by the US and immediate retaliatory action from China."
The direct impact of the trade war on growth and inflation was negligible at this stage. A further escalation of tensions would be a negative factor for the kiwi, Mr Wong said.
The US68c to US69c support area in place for the past 18 months looked vulnerable in the short term. As a result of the global factors, the BNZ had shaved US2c off its September target to the mid-point of $US68.5c but left the year-end target at US70c unchanged at this stage, he said.
Reserve Bank monetary policy remained unsupportive for the kiwi as core inflation remained below target.
Easier fiscal policy and higher farm incomes supported economic growth in the coming year.
"Despite our near-term downgrade to the dollar, at a current bottom-of-the-range level, it would be prudent for exporters to add to cover for those who are under-hedged.
"Given our near-term outlook, for importers it looks a real stretch to see a quick return to levels seen earlier this year of above US72c."
