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NZ dollar holds near 8-month low as NZ election looms, US growth slows

Wednesday 23rd November 2011

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The New Zealand dollar held near an eight-month low ahead of this weekend’s general election and after figures showed the US economic growth slowed more than expected in the third quarter.

The kiwi dollar rose to 74.86 US cents, from 74.71 cents at 5pm yesterday. The currency dropped to 74.43 cents yesterday, the lowest since late March. The trade-weighted index increased to 66.51 from 66.45, after hitting an eight-month low on Tuesday.

With New Zealanders set to cast their votes on Nov. 26, a Fairfax Media poll puts the incumbent National Party support up 1.5 percentage points to 54 percent, Labour support on about half that, up 0.1 point to 26 percent and the Green Party on about 12 percent..

That suggests the main uncertainty would be if National doesn’t get an outright majority and has to form a coalition with a smaller party.

Alex Sinton, senior dealer at ANZ New Zealand, said some investors have been selling New Zealand dollars ahead of the vote.

“Offshore investors are likely to be more comfortable with a National government because they know what their policy and track is,” he said.

Gross domestic product in the US, the world’s biggest economy, grew at a revised 2 percent annual rate in the third quarter, down from the previously reported 2.5 percent.

The kiwi dollar didn’t move much after the Federal Reserve Open Market Committee minutes showed America’s central bank had considered putting in place more easing measures to revive economic growth.

The US Congress’s so-called ‘super committee’ conceded this week that it had failed to reach accord on slashing the federal budget deficit. The committee has failed to agree on US$1.2 trillion of budget cuts, stoking concerns unwieldy levels of debt in the US and Europe will stifle global growth. Standard & Poor’s stripped the nation of its top AAA credit grade on Aug. 5.

In New Zealand, no economic data is set to be released today.

The kiwi dollar rose to 57.62 yen from 57.53 yen yesterday, it gained to 75.88 Australian cents from 75.77 cents and was up 47.88 British pence from 47.77 yesterday. It dropped to 55.34 from 55.36.

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