The New Zealand dollar has hit a one-month low after international credit agency Standard & Poors' cut the country's foreign currency rating outlook from stable to negative.
The dollar tumbled nearly 2% to 56.3 US cents on the news.
It also touched a one-month low against the yen.
RBC capital markets says it is an "extremely bearish" development for the currency.
The Government says the downgrade vindicates the urgency with which it is implementing its economic plan.
It says the position is not as comfortable as it would like, but notes that it follows similar changes for Spain, Ireland and Greece.
While the ratings agency affirmed New Zealand's positive foreign currency and local currency long-term debt ratings, it changed the outlook for foreign currency rating to negative.
Finance Minister Bill English says the present economic conditions are the most challenging to face a New Zealand government in a long time.
Mr English says any calls for further fiscal stimulus need to be weighed up against the consequences of taking on further debt.
