The kiwi had dropped from US79c a fortnight ago to US75.96c about noon yesterday, its second-lowest level since January, following a 1c overnight fall on Monday.
Following record global oil prices nudging beyond $US139 during the weekend, at least two major companies increased fuel prices by 6c per litre yesterday, with Caltex' products respectively up to $2.06 for 91 octane and $2.11 for 95 octane ratings.
Westpac senior economist Doug Steel said while the falling dollar was good for exporters - hard hit during the past three years by the high dollar - the falling dollar would put prices up for importers and fuel companies "to be paid for by consumers".
Mr Steel said about half the US3c fall was attributable to Reserve Bank governor Alan Bollard suggesting last week there may be a forthcoming cut to the 8.25% interest-driving official cash rate in the future, with the balance coming from a strengthening greenback.
He said Dr Bollard's suggested OCR cut meant a reduced yield advantage for foreign investors would be undermined and the kiwi was subsequently "sold down aggressively" by traders, by about US1.5c.
However, Mr Steel cautioned that the gathering strength of the greenback was attributable to a changing outlook for domestic interest rates.
The rise was a "bounce from a bad position", considering US unemployment had gone from 5% to 5.5%, he said.
He was asked if a rise in fuel price in New Zealand was justified considering it was only five days since the record more than $US139 was struck.
"We have already been pricing it at above $2 per litre for some time," he said.
In April, just before fuel hit $2 per litre, economists were attributing a 35c per litre buffer against the $2 price to the strength of the kiwi, sitting around US79.4c at the time.
Three weeks ago, with Dubai oil priced at $US127 per barrel and the exchange rate at US70c, 91 octane fuel could have retailed for around $2.24, Westpac economists said at the time.
BNZ chief economist Craig Ebert said with investors shying away from bonds, property, equities and finance, commodities such as oil were now most popular for yields.
However, at present prices they were "obviously overvalued".
"They're all putting their money with commodities; classic behaviour of a bubble situation," he said yesterday The major concern with inflation beginning to impact on global economies would be the outcome of the commodities investing during the next six to 12 months, he said.
"Inflation, which is never good news, tells us things are becoming overheated," Mr Ebert said.
BNZ was predicting the kiwi to drift down to about US72c by the end of September and around $US69c at December.
If oil prices stayed at the present high levels, it would become a "very difficult time" for motorists, Mr Ebert said.
