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NZ dollar falls after govt policy emerges in coalition deals

Published: Tue 24 Oct 2017 08:21 PM
NZ dollar falls after govt policy emerges in coalition deals
By Rebecca Howard
Oct. 24 (BusinessDesk) - The New Zealand dollar fell after government policy details emerged in Labour's coalition agreement between Labour and NZ First and the confidence and supply deal with the Greens.
The kiwi slipped to 69.44 US cents as at 5pm from 69.61 cents as at 8am in Wellington and 69.63 cents late yesterday. The trade-weighted index declined to 73.27 from 73.60.
Prime Minister-elect Jacinda Ardern released the agreements with the two parties, promising to "work together to provide New Zealand with a transformational government".
The kiwi had pushed higher during the local trading session, touching 70.03 US cents, in "what was really a partial recovery after being pummelled for the last few days," said Westpac Banking Corp senior strategist Imre Speizer. "Then we got some details of the coalition agreement and it's reacting in a negative way."
Speizer said there is nothing specific in the agreements justifying a fall in the kiwi but the market may have been looking for more details and was disappointed. "It was a taste but not enough to form a confident opinion on what the policies mean for the economy," he said.
Among other things, Ardern said the new government was determined there would be a "ban" on the sale of existing homes to non-resident foreign buyers, but remained opaque on how that might be achieved.
Regarding comments on the review of the Reserve Bank Act, Speizer said the announcement actually reduces some uncertainty as Ardern specified it won't include exchange rate targeting but will include a labour market reference.
The kiwi also fell to 88.78 Australian cents from 89.07 cents late yesterday The focus, however, will now be on Wednesday's consumer price inflation data across the Tasman and a softer-than-expected read could weigh on the Aussie. Economists expect quarterly inflation of 0.8 percent and 2 percent for the year, according to the median in a poll of 23 economists by Bloomberg.
The kiwi dropped to 78.69 yen from 79.11 yen late yesterday after Japanese PM Shinzo Abe's ruling coalition had a convincing election win over the weekend, ensuring the continuation of stimulatory monetary policy.
The local currency decreased to 52.52 British pence from 52.76 pence. It traded at 4.6025 yuan from 4.6065 yuan and at 59.01 euro cents from 59.11 cents.
New Zealand's two-year swap rate was unchanged at 2.16 percent and 10-year swaps were unchanged at 3.19 percent.
(BusinessDesk)
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