Dollars falls on Labour news

by Kelly Gregor20 Oct 2017
The dollar fell about 2% to a five-month low this morning after NZ First announced last night it would form a Labour-led government.

BusinessDesk reported that the kiwi was trading at 70.08 US cents as at 8:30am in Wellington from 71.29 cents yesterday, before the announcement on the new government. The trade-weighted index fell to 73.79 from 75.18.

Jacinda Ardern is the youngest Prime Minister of New Zealand for 150 years. Ardern has not yet named Cabinet Ministers or set out policy priorities, but markets have already weakened the dollar on speculation the new government may borrow, and spend more, curb migration, and tweak the Reserve Bank Act and may raise the minimum wage.

The dollar fell to 53.29 British pence from 53.96 pence and declined to 89.13 Australian cents from 90.80 cents. If fell to 4.6348 yuan from 4.7273 yuan and dropped to 78.96 yen from 80.50 yen. The kiwi fell to 59.24 euro cents from 60.40 cents.

Last night, the kiwi dropped as low as 70.62 US cents and was trading at 70.65 cents as at 7.15pm from 70.94 cents before NZ First’s Winston Peter’s started his briefing.

New Zealand's financial markets have been in a state of flux since the September 23 election, which left NZ First holding the balance of power and once special votes were counted the gap between National and the Labour-Green bloc got even tighter.

On policy concessions, Peters confirmed he expected the Reserve Bank Act to change, and that he anticipated there would be "fewer people coming here". He also expected 10,000 affordable homes to be built every year to help boost ownership for first-home buyers.

Peters said the major decisions have been made, and that he expects to be able to sort out any further things that crop up as they arise.

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