NZ dollar falls on election uncertainty, weak business confidence, trade data

Tuesday 26th September 2017

The New Zealand dollar fell against the US dollar on ongoing uncertainty about the election outcome and on the back of weak business confidence and trade data.

The kiwi was trading at 72.45 US cents as at 5pm in Wellington from 72.54 cents late yesterday. The trade-weighted index rose was at 75.91 from 75.88 late yesterday.

There was no clear winner in Saturday's election and now both the National Party and Labour-Green bloc are vying to form a government with New Zealand First.

No decision is expected for several weeks and talk of "50-50 on which way Winston could go was hardly ideal," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

The kiwi was also weighed when business confidence fell to a net zero reading with as many pessimists as optimists. According to the ANZ Business Outlook survey, the September result is down from a net 18.3 percent of firms that expected general business conditions to improve over the coming year in August.

"It was a terrible number. On every measure, that was weak," said Kelleher. The kiwi also eased when the country had a trade deficit of $1.235 billion in August versus the $825 million median forecast in a Bloomberg survey of 10 economists.

Against that backdrop as well as a stronger greenback, Kelleher said it was surprising the kiwi hasn't fallen further. He said he was hearing talk of an option structure expiry at around 73 US cents that might be limiting some of the downside. While he had no details, he said the client would likely be selling above 73.50 US cents and buying back at around 72.50 US cents and it would likely be a reasonably sized position.

Looking ahead, markets will be waiting for a raft of US Federal Reserve speakers with the main focus on a speech by Fed Chair Janet Yellen on "Inflation, Uncertainty, and Monetary Policy" later in the global trading day.

The kiwi traded at 61.08 euro cents from 60.80 cents late yesterday. It fell to 80.78 yen from 81.40 yen. The kiwi gained to 53.73 British pence from 53.62 pence, was at 91.17 Australian cents from 91.19 cents and at 4.7926 Chinese yuan from 4.7891 yuan.

The two-year swap rate fell 3 basis points to 2.17 percent and 10-year swaps were down 4 basis points to 3.16 percent.

(BusinessDesk)

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