NZD: Big changes? - Rabobank
|The result of New Zealand’s September 23 election was always going to be close, but the final result announced over the weekend has further narrowed the gap between the centre-left bloc and the ruling National Party, notes Jane Foley, Senior FX Strategist at Rabobank.
Key Quotes
“The Labour and Green party each took one seat from the National Party meaning that together they now have 54 seats compared with 56 from the National Party. The position of New Zealand First remains unchanged on 9 seats as does its ability to play kingmaker over the next few days. New Zealand First leader Peters has indicated that he will announce by October 12 which side he will support, dependent on the concessions that are offered.”
“The nationalist New Zealand First campaigned on a platform that includes slashing immigration, reforming the Reserve Bank and stopping foreign ownership of New Zealand’s land and assets. The latter raises uncertainties about inward investment and the openness of the NZ economy while reform of the Reserve Bank indicates a preference for a different role for the NZD. The NZD is again the worst performing G10 currency this morning and has dropped almost 3.5% vs the USD since September 22 on the back of the election result.”
“Any changes to the RBNZ that err towards those proposed by New Zealand First are likely to have a depressive impact on the NZD given speculation that the RBNZ would be mandated to targeted a weakened value for the currency.”
“If a Labour, Green and New Zealand First government alliance is announced, risk would open up of a retracement of NZD/USD towards its May low, close to the 0.68 level.”
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