Political limbo hurts NZ dollar

  • 30/09/2017
The NZ dollar is likely to be restrained as both National and the Labour-Green bloc seek to form a Government with NZ First. Photo credit: Getty

The New Zealand dollar is heading for a 1.8 percent weekly decline amid domestic political uncertainty and a stronger US dollar as investors price in a greater chance of a US rate hike December.

The kiwi was trading at US72.10c as at 5pm in Wellington from 71.92c late Thursday and from 73.39 a week ago.

The greenback is benefiting as Fed funds futures now imply around a 73 percent chance of a Fed rate hike at the December 12-13 policy meeting after strong data and a raft of Fed speakers this week.

President Donald Mr Trump's proposals for tax cuts also helped shore up the greenback, although the lack of detail on how it will be funded is limiting the gains, traders said.

The New Zealand dollar, meanwhile, is likely to be restrained as both the National Party and the Labour-Green bloc seek to form a Government with New Zealand First, led by Winston Peters.

"Going into next week, the kiwi remains vulnerable to the downside as we await the outcome of where New Zealand First will lay their hat," said Stuart Ive, OMF private client adviser.

Mr Peters has said he won't make a decision until all votes are counted on October 7.

Looking ahead, Mr Ive said investors will be watching for US data later in the global trading day such as the US PCE deflator figures. Economic growth figures out of Canada will also be watched as will inflation data out of Europe.

The kiwi traded at 61.19 euro cents from 61.31c and at 53.75 British pence from 53.76 pence. It traded at 81.20 yen from 81.28 yen, at A91.91c from 91.92c and gained to 4.8141 yuan from 4.7879 yuan.