Friday was a turbulent day for the New Zealand dollar and stock market.
The benchmark NZX 50 index fell more than 1% at one stage, before retracing some losses to decline about 0.5% by the close of trade.
The dollar fell as low as US77.1 cents, before regaining about three-quarters of a cent on Friday evening.
Analysts says both have been hit by sluggish New Zealand economic growth and investor nervousness globally about the readiness of the American economy to stand alone without central bank aid.
The New Zealand currency has fallen about 10% since hitting a high of US86.3 cents in mid-April this year.
The turmoil on global equity markets spilled into bonds and commodities, with gold dipping to a three-year low.
On Thursday, the Dow Jones fell by 2.3% - its biggest fall of the year to date. Asian stocks were mixed, falling sharply at first before recovering some ground later on Friday.
The US dollar has rallied strongly as investors pick interest rates to rise sooner than expected after the Federal Reserve signalled an end to the stimulus programme and easy money.
The head of institutional FX sales at the ASB bank, Tim Kelleher, says that triggered a wholesale sell off of the New Zealand dollar.
Mr Kelleher says he expects two to three more days of volatility, but if it continues it may restrict the Fed from winding down the stimulus programme.
Interest rates at historic lows
The Fed's bond-buying programme, or quantitative easing, has lifted the US economy and world financial markets by pushing interest rates to historic lows.
However, Fed chairman Ben Bernanke said on Wednesday that if the US economy continued to improve, the central bank might start winding up the quantitative easing programme later this year, with the aim of stopping it completely by the middle of 2014.
One economist believes markets may be overreacting to Mr Bernanke's comments.
AMP Capital chief economist Bevan Graham says that, overall, markets should see it as positive news, because it indicates the Fed believes that fundamentally the American economy is starting to improve.
Dollar expected to hover around 78c mark
Westpac currency strategist Imre Speizer believes it is likely the New Zealand dollar will hover around US78 cents in the next few months, before gradually strengthening as the New Zealand economy also improves.
Mr Speizer says the effects of the drought and the Federal Reserve's move are likely to make the kiwi vulnerable in the next few months.
"Those two things combined will cause the kiwi to at least fall back to around 78 (US cents). If it breaks lower, though, it could fall a lot further, so we're watching that US78 cent area very, very closely."
Mr Speizer says that in a year's time the New Zealand economy should be improving again and getting close to a Reserve Bank tightening cycle, which should boost the kiwi against the US - so it could be expected to be back into the mid-US80c range.