NZ dollar rises as investors see financial stability after National election win

Monday 22nd September 2014

The New Zealand dollar advanced after the incumbent centre-right National Party won an outright election victory at the weekend, reassuring investors that current economic policies would continue.

The kiwi gained to 81.49 US cents at 8am in Wellington, from 81.24 cents at the New York close and 81.36 cents at 5pm on Friday. The trade-weighted index rose to 78.84 from 78.44 on Friday.

National could govern alone based on the election night result of 61 seats in a 121-seat parliament. Assuming that holds once the final count is complete, Prime Minister John Key is likely to form a National-led coalition including two Maori seats and one each from Act New Zealand and United Future in his third term, lifting the government's total to 65 seats. The promise of stability is reassuring to investors, helping strengthen the New Zealand dollar. However analysts say the longer-term trend for a stronger US dollar is likely to resume soon.

The election result "will go a long way to boost confidence in the business sector, and even consumer confidence, so it's all a positive, no surprises really it is a real positive for the financial sector," said Martin Rudings, senior dealer, foreign exchange, at OMF.

The New Zealand dollar faces strong resistance at 82 US cents and may not appreciate beyond 81.75 cents today, Rudings said.

"The ultimate trend will prevail, which is a strong US dollar so I think this is just a very short-lived relief rally, a relief we didn't get the unknown into government," Rudings said. "By the end of the week, the kiwi will probably be lower. Kiwi against the US is probably still on a downward path."

Today, a report on New Zealand consumer confidence is scheduled for release by Westpac Banking Corp.

The New Zealand dollar jumped to 91.22 Australian cents from 90.79 cents on Friday, advanced to 63.51 euro cents from 62.98 cents, gained to 50 British pence from 49.38 pence and rose to 88.90 yen from 88.78 yen.

BusinessDesk.co.nz

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