Friday 25th November 2011
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The New Zealand dollar held near an eight-month low as ongoing fears over Europe’s sovereign debt crisis nag at investors’ confidence, as the nation prepares for tomorrow’s general election.
The kiwi fell to 74.15 US cents, from 74.37 at 5pm yesterday, after dropping as low as 73.80 cents, the weakest level since March 22.
New Zealand’s general election is likely to see the incumbent National-led administration retain the Treasury benches, with the latest NZ Herald-Digi Poll survey showing Prime Minister John Key’s party winning more than 50 percent of the party vote. Though that would give Key’s party an unprecedented governing majority under the Mixed Member Proportional electoral system, it’s still close enough that he may need support parties.
Support for the opposition Labour Party fell 1.1 percentage points to 28 percent, while the Green Party’s support was down to 11.8 percent and NZ First are on 5.2 percent.
Bank of New Zealand strategist Mike Burrowes said there are clearly much bigger things happening globally impacting on the currency, and the only way the election could lead to uncertainty for the kiwi is if there is a week or two where a coalition is formed.
“If you have the expected result though it won’t have too much effect on the market,” he said.
The kiwi dollar’s weakness comes as the pound fell to a seven-week low against the US dollar after German Chancellor Angela Merkel said joint Euro bonds would send the “wrong signal,” spooking already fragile investor confidence.
Merkel said she remained opposed to joint euro bonds, damping optimism the policy would help resolve the debt crisis, Bloomberg reported.
Earlier this week, Germany failed to find buyers for 35 percent of the 6 billion euros of government bonds it put up for sale. The failed auction underpinned concerns Europe’s debt crisis is driving away investors from the region.
Trading is expected to be thin over the next day with US markets closed for the Thanksgiving holiday. BNZ’s Burrowes said the markets are using it as an “excuse to have a breather,” with no international data scheduled for release across the weekend it should be quite globally.
New Zealand has no major data scheduled for release today either.
The Kiwi dollar fell to 76.15 Australian cents from 76.32 yesterday and declined to 57.18 yen from 57.28 yen. It was little changed at 55.58 euro cents from 55.57 euro cents and increased to 47.84 British pence from 47.79 yesterday.
The trade weighted index declined to 66.36 from 66.47 yesterday.
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