The dollar recovered slightly on Wednesday after falling against most main currencies on Tuesday.
By late in the day, it was buying 55.58 US cents - up from 54.6 US cents early in the morning. It was also trading at 82.38 Australian cents and 49.96 cents against the yen.
The dollar fell almost US3c on Tuesday after ratings agency Standard & Poor's amended New Zealand's foreign currency rating outlook from stable to negative.
A bank economist says the Government will face higher interest payments after the warning from New York-based Standard & Poor's.
ANZ National chief economist Cameron Bagrie says this could have consequences for government spending because the Government needs to find buyers for up to $10 billion of bonds a year as the economy weakens further and the deficit grows.
Mr Bagrie says this will add to the Government's debt servicing costs. However, the increases will not be as great as for some countries with higher overall debt levels. These countries will need to pay an even higher interest rate to investors.
Interest rates cut
ANZ and National banks have cut their fixed-rate mortgage rates as the outlook for the economy continues to worsen.
The banks cut rates by between 0.2 and 0.89 of a percentage point on Wednesday for their two, three, four and five-year mortgages.
Fixed-term rates were cut by ASB and Westpac last month.
Mr Bagrie says the outlook for the economy continued to worsen over Christmas.
He says this will increase pressure on the Reserve Bank of New Zealand to cut the Official Cash Rate by a full percentage point at its next review on 29 January.
Bank of New Zealand - which still has the highest three and five-year fixed rates of the main trading banks - say it is reviewing its mortgage rates.
