NZ dollar tumbles to five-month lows; Aussie off after U.S. tax nod
By Swati Pandey
SYDNEY, Oct 20 (Reuters) - The New Zealand dollar sank to a
five-month trough on Friday on concerns the new Labour coalition
will take a harder stance on immigration and foreign investment
than the outgoing centre-right government.
The country has been in political limbo since New Zealand's
general election on Sept. 23 in which no single party won a
majority, leaving them reliant on a small nationalist party
which emerged as the kingmaker.
New Zealand First leader Winston Peters, who holds the
balance of power with nine seats, ended the political guessing
game on Thursday night when he announced he would back the
Labour party which had been in opposition in the last 10 years.
The news sent the New Zealand dollar tumbling 1.7
percent, its biggest intraday percentage decline since mid-2016.
It extended losses on Friday to $0.6971, a level not seen since
The kiwi has lost 2.4 percent of its value this week and is
poised for its worst weekly performance since December 2016.
"The risk is that (the new government) will take a bit of a
populist bent in contrast to the rationalist National Party
Government, reflecting similar pressures to those seen in recent
elections in the UK, U.S. and Australia," said Shane Oliver,
head of investment strategy at AMP Capital.
Anti-immigration sentiment has been a prominent theme in
elections around the world in recent years, leading to surprise
outcomes such as Britain's vote to leave the European Union and
the election of Donald Trump as the U.S. President. Closer to
home, Australia's conservative government has also taken a
harder stance on immigration and foreign investment.
Investors were still awaiting clarity on the policies of the
ruling coalition under Jacinda Ardern, New Zealand's youngest
leader in more than 150 years.
Ardern will spend Friday ironing out issues and ministerial
posts with coalition partner New Zealand First. She confirmed
that most of the party's flagship policies, including a ban on
some foreign ownership of housing, had survived the negotiations
with Peters in recent weeks.
Across the Tasman, the Australian dollar skidded
0.5 percent against the greenback to $0.7831, which rose after
the U.S. Senate approved a budget blueprint for the 2018 fiscal
For the week, the Aussie is set to end 0.6 percent lower
following a solid 1.5 percent gain the previous week.
The Australian dollar hit its highest against the kiwi since
New Zealand government bonds were a tad softer
with yields up about half a basis point on the long end of the
Australian government bond futures rose, with the three-year
bond contract and the 10-year contract up 1 tick
each at 97.870 and 97.2200.
(Editing by Sam Holmes)
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