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Dollar holds below 71 US cents as election outcome awaited

NZ dollar holds below 71 US cents as election outcome awaited

By Jonathan Underhill

Oct. 9 (BusinessDesk) - The New Zealand dollar held below 71 US cents, having earlier sunk to a five-month low, after the count of special votes at the weekend left the election too close to call, while talk of a North Korean missile test weighed on the greenback.

The kiwi traded at 70.75 US cents as at 5pm in Wellington from 70.53 cents at the start of the day and from 70.92 cents in New York on Friday. The trade-weighted index declined to 74.86 from 75.11 on Friday.

The kiwi dropped when the market opened today after the weekend announcement that Labour and the Greens each took one seat from National, leaving the NZ First Party as king/queen maker. NZ First leader Winston Peters, who has set Thursday as a deadline for coalition talks, told reporters today that foreign ownership rules were on the agenda for forming the next government but generally declined to give details of negotiations, citing the need for confidentiality.

"It's still a bit of a line-ball call," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. If NZ First aligns with Labour/Greens "I would've thought we might get a knee-jerk selloff in the kiwi" and it could quickly slip below 70 cents.

The US dollar jumped on Friday in the US after payrolls data showed that economy unexpectedly shed 33,000 jobs last month, reflecting hurricane disruptions, although wage inflation rose and the jobless rate fell. However, the greenback fell again after reports that North Korea is preparing to test a missile capable of reaching the US West Coast.

With little local economic data scheduled this week, politics is likely to take centre stage in the domestic market. An update of retail sales is due tomorrow with the release of electronic cards for September tomorrow.

The kiwi traded at 60.27 euro cents, having earlier dropped to 60.10 cents, from 60.34 cents on Friday in New York. The local currency fell to 54.05 British pence from 54.15 pence on Friday and traded at 91.01 Australian cents, up from 90.68 cents at the start of the day and from 91.07 cents on Friday. It traded at 4.6963 yuan from 4.7099 yuan and traded at 79.70 yen from 79.77 yen on Friday.

New Zealand's two-year swap rate was unchanged at 2.20 percent and the 10-year swaps were steady at 3.25 percent.


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