Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


NZ dollar falls as markets await new government

NZ dollar falls as markets await new government

By Rebecca Howard

Sept. 25 (BusinessDesk) - The New Zealand dollar fell after there was no clear winner in Saturday's election with both the National Party and Labour-Green bloc vying to form a government with New Zealand First.

The kiwi dropped to 72.54 US cents as at 5pm versus 73.30 US cents as at 8am in Wellington from 73.39 cents on Friday in New York. The trade-weighted index declined to 75.88 from 76.33 last week.

"For all intents, this is very much like a hung parliament really, and yet no-one really talks about it like that. Rather, the chatter is all around forming a new government and (New Zealand First leader) Winston (Peters) is the kingmaker," said Mark Johnson, senior dealer at OMF. He noted the parties will be waiting for the special votes - 15 percent of the total cast - to be counted, with that result due Oct. 7. Peters has indicated he would make a decision by Oct 12 and "I feel like we are in a bit of a no-man's land at the moment," said Johnson.

Against that backdrop, the focus is likely to shift to the US. Markets seem to be taking the latest round of taunts between the US and North Korea in their stride "but the question is really how hard can you push," he said.

According to Reuters, US President Donald Trump dialled up the rhetoric against North Korea again at the weekend, warning the country’s foreign minister that he and leader Kim Jong Un “won’t be around much longer”, as Pyongyang staged a major anti-US rally.

Looking ahead, Johnson said a raft of Federal Reserve speakers this week will be closely watched, in particular, a speech from Fed chair Janet Yellen on 'Inflation, uncertainty and monetary policy' early Wednesday local time. He noted that Trump is also expected to present this tax package at some point this week, which could also move the US dollar.

Domestically the central bank has a policy review this week but all economists are expecting the official cash rate to stay on hold at 1.75 percent in what will be acting governor Grant Spencer's first monetary policy decision.

"We have an interim governor and a caretaker government so I would imagine that Spencer isn't going to want to rattle anything in the way of anybody's cage," said Johnson.

Ross Weston, a senior trader at Kiwibank, said there wasn't too much activity in swap rates, despite Saturday's election. The two-year swap rate fell 2 basis points to 2.20 percent and 10-year swaps were down 3 basis points to 3.20 percent.

He expects two-year swaps to remain anchored at low levels given there is a temporary governor and a persistent on hold message. "I think the election is not a big deal for markets as any rate hikes are some way off" but markets will be watching for any fiscal impulse once the panorama is clearer, he said.

The kiwi traded at 60.80 euro cents from 61.41 cents on Friday in New York. Chancellor Angela Merkel did win a fourth term in office on Sunday but will now have to build a challenging coalition. "She's probably got a bigger problem on her hands trying to cobble together a coalition government," said Johnson adding that Merkel has indicated it will take considerably more time than a couple of weeks.

The kiwi fell to 53.62 British pence from 54.38 pence last week and was at 81.40 yen from 82.17 yen. It traded at 91.19 Australian cents from 92.15 cents last week and fell to 4.7891 Chinese yuan from 4.8363 yuan.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Voluntary Administration: Renaissance Brewing Up For Sale

Renaissance Brewing, the first local company to raise capital through equity crowdfunding, is up for sale after cash flow woes and product management issues led to the appointment of voluntary administrators. More>>


Approval: Northern Corridor Decision Released

The approval gives the green light to construction of the last link of Auckland’s Western Ring Route, providing an alternative route from South Auckland to the North Shore. More>>


Media Mega Merger: Full Steam Ahead For Appeal

New Zealand's two largest news publishers have confirmed they are committed to pursuing their appeal against the Commerce Commission's rejection of the proposal to merge their operations. More>>

Crown Accounts: $4.1 Billion Surplus

The New Zealand Government has achieved its third fiscal surplus in a row with the Crown accounts for the year ended 30 June 2017 showing an OBEGAL surplus of $4.1 billion, $2.2 billion stronger than last year, Finance Minister Steven Joyce says. More>>


Mycoplasma Bovis: One New Property Tests Positive

The newly identified property... was already under a Restricted Place notice under the Biosecurity Act. More>>

Accounting Scandal: Suspension Of Fuji Xerox From All-Of-Government Contract

General Manager of New Zealand Government Procurement John Ivil says, “FXNZ has been formally suspended from the Print Technology and Associated Services (PTAS) contract and terminated from the Office Supplies contract.” More>>