Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

UPDATE 1-NZ dollar sinks as Labour forms ruling coalition; A$ steady

Published 19/10/2017, 05:50 pm
Updated 19/10/2017, 06:00 pm
© Reuters.  UPDATE 1-NZ dollar sinks as Labour forms ruling coalition; A$ steady

© Reuters. UPDATE 1-NZ dollar sinks as Labour forms ruling coalition; A$ steady

(Adds analysts' comments, updates levels throughout, adds A$)

By Swati Pandey

SYDNEY, Oct 19 (Reuters) - The New Zealand dollar tumbled to a 4-1/2 month low on Thursday after the left-leaning Labour Party won the support of a minor nationalist party to form a ruling coalition, following an inconclusive election last month.

Winston Peters, the leader of the small New Zealand First party which emerged as the kingmaker from the Sept. 23 vote, pledged to back Labour, ending weeks of political guessing games. New Zealand dollar NZD=D4 extended early losses after the news. It slid as much as 1.4 percent to $0.7047, a level not seen since late May and the biggest percentage decline since November 2016.

The currency has now fallen 3.7 percent since the vote.

Investors are concerned a Labour win could be negative for the New Zealand economy and currency due to the party's hardline policies on immigrants and foreign ownership.

Before the election, the currency tended to strengthen when National, which had been in power for nearly a decade, rose in opinion polls and fall when Labour gained ground.

"It was always likely that the knee-jerk reaction to the news for Winston Peters going with Labour would be negative," said Ray Attrill, currency strategist at National Australia Bank.

"It's too early to draw any conclusion on what the economic or policy landspace might look like under this new government."

NZ First has more in common with Labour on the policy front, as both want to rein in immigrants and foreign ownership, change certain trade deals and adjust the central bank's mandate.

Attrill said he expects the changes to the Reserve Bank of New Zealand's target agreement to be "cosmetic" in pratice, without any potential policy implications.

Across the Tasman Sea, the Australian dollar AUD=D4 briefly popped up to $0.7871, after official labour data came in stronger than expected. It was last a touch firmer at $0.7858.

Australia enjoyed another month of solid job growth in September, with the annual pace of gains sprinting ahead to the fastest in almost a decade and nudging the unemployment rate lower.

Data on Thursday showed the unemployment rate slipped to 5.5 percent, compared with analysts' expectations for a steady 5.6 percent. saw a kneejerk upward reaction on the release but then the market wants to see the increase in jobs translating to higher wages growth and inflation," said AMP Chief Economist Shane Oliver.

"And then the Chinese data wasn't good enough to excite in either direction."

China's industrial output growth accelerated to a three-month high in September, while fixed asset investment growth continued to decline, falling to the slowest pace since December 1999.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.