NZ dollar gains on National Party election win

Monday 22nd September 2014

The New Zealand dollar gained after the incumbent National Party won a convincing election victory on the weekend, instilling confidence in the administration's ability to continue pursuing its policy programme.

The kiwi rose to 81.53 US cents at 5pm in Wellington from 81.49 cents at 8am, and was up from 81.24 cents on Friday in New York. The trade-weighted index advanced to 78.78 from 78.53 last week.

The local currency got a boost from the Saturday general election, which delivered the ruling National Party a bare majority, with 61 seats of the 121-seat Parliament. If that holds after special votes are counted, Prime Minister John Key is still likely to support agreements with the Maori, United Future and Act parties, taking the government's total to 65 seats. Any further gains in the kiwi may be muted ahead of Fonterra Cooperative Group's annual result on Wednesday, which may see the dairy exporter update its forecast milk payout to farmers and will confirm final payouts for the 2013/14 season.

"If they (Fonterra) comment on the forecast right now, you'd be betting they would be dropping it," said Imre Speizer, market strategist at Westpac Banking Corp in Auckland. The local currency may trade between 80.80 US cents and 81.80 cents. "It's hard to see it breaking out of that," he said.

A BusinessDesk survey of 10 currency traders and strategists predicts the kiwi will probably trade between 80.50 US cents and 82.50 cents this week. Three pick the local currency to decline, four expect a gain and three say it will probably remain relatively unchanged.

New Zealand consumer confidence fell in the third quarter this year, according to a Westpac McDermott Miller survey. The series extended a decline from a nine-year high in March as rising interest rates and a slower pace of economic growth weigh on households, though optimists remain dominant and the index remains at historically high levels.

The local currency gained to 88.71 yen from 88.56 yen last week, and increased to 91.24 Australian cents from 90.96 cents. It edged up to 63.41 euro cents from 63.32 cents, and was almost unchanged at 49.86 British pence from 49.87 pence.

BusinessDesk.co.nz

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