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NZ dollar falls after pre-election update as polls show closer race

Wednesday 23rd August 2017

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The New Zealand dollar fell after the pre-election fiscal showed weaker growth and as polls showed that one month out from the election it is a close race.

The kiwi declined to 72.31 US cents as at 5 pm versus 72.75 US cents as at 8am in Wellington and from 73.24 cents late yesterday. The trade-weighted index was at 76.18 from 77.01.

Martin Rudings, senior dealer foreign exchange at OMF in Wellington said the kiwi dipped against most of the crosses in the wake of the pre-election fiscal update. The forecasts showed a bigger surplus for the 2017 financial year, largely at the expense of out-years and scaled back projections for economic growth from the May update, with Treasury predicting gross domestic product grew 2.8 percent in the 2017 June year, a slower pace than the 3.1 percent previously forecast. 

Overall, however, Rudings said the kiwi is "going to lie on the weaker side from now until the election" on Sept 23. "It is sort of going to have to go off the radar for a lot of these investors. There's no point buying into uncertainty. Markets have now started to tune into this election now we have had a bit of an upheaval and the polls are sort of a bit more even," he said.

He said upcoming political debates will soon start hitting the headlines and the "speculative buyers are going to be absent."  He tipped more short term downside against the euro and the Aussie.  

The kiwi fell to 61.49 euro cents from 62.04 cents and fell to 91.62 Australian cents from 92.28 cents. 

Looking ahead, he said investors are awaiting the annual central banking conference in Jackson Hole, Wyoming later this week.  Further ahead, next week will see Personal Consumption Expenditures data out of the US, the Federal Reserves preferred inflation measure, and the e US jobs data, both of which will be keenly watched. 

The kiwi traded at 56.42 British pence from 56.84 pence. It fell to 4.8159 yuan from 4.8755 yuan and to 79.18 yen from 80.03 yen. 

New Zealand's two-year swap rate was unchanged at 2.17 percent while 10-year swaps rose 2 basis points to 3.15 percent. 


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