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New Zealand Dollar Continues to Fall; Now Worth Less Than USD 0.7

Holders of New Zealand dollars are still suffering on Friday as the currency continues to fall following last night’s news that New Zealand will be led by a Labour government, with Jacinda Ardern at the helm.

In the twenty-four-hour period leading up to 4pm in Wellington, the New Zealand dollar weakened nearly 2.25% against the US dollar, falling below the psychological support level of 0.7 in the process. NZD/USD was last seen at 0.6976 – a five-month low.



NZD/USD 3 Month Chart

Trading continues of course, into the much more active European and New York FX sessions, during which further weakness in New Zealand’s currency cannot be ruled out.

Within the same twenty-four-hour period, against the Australian dollar and euro, the “kiwi” weakened by 2.1% and 2.3% respectively, sending AUD/NZD and EUR/NZD to their highest levels since the second quarter of 2016, at 1.1234 and 1.6928.

The New Zealand dollar faces similar losses against each of the other majors.

Investors typically dislike political uncertainty, or in fact political change where it’s deemed unnecessary, and so Thursday’s decision by the New Zealand First party to support Labour after weeks of coalition talks doesn’t sit well. The decision ends a nine-year reign by the National party, which failed to secure a majority in September’s election after winning only 58 seats in the 120-seat House of Representatives. Labour won 45 seats.

The mere involvement of NZ First in any coalition also displeases investors. Arguably, the New Zealand dollar would be higher today than it is if Labour had won power via an elected majority.

“The presence of NZ First in any coalition will limit any gains [in NZD] given its key policies,” said Westpac’s Imre Speizer in September.

NZ First’s policies are widely disliked by investors; these include tighter immigration controls, restrictions on foreign investment and a revised mandate for New Zealand’s central bank – the party would like the RBNZ to focus less on inflation and more on the competitiveness of the New Zealand dollar.

Under Ardern’s leadership, New Zealand will seek to renegotiate the Trans-Pacific Partnership trade deal. The deal, which had been supported by the National party, won’t grant adequate powers to the government to restrict foreign ownership of land and property according to Labour’s campaign message.

 

 
Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product.
 
 

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