NZ dollar falls as markets wait to see which parties will govern

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The New Zealand dollar fell while remaining in a narrow trading range as the market waits to find out which parties will form the country's next government.

The kiwi dollar was trading at 71.59 US cents as at 5pm from 71.66 US cents as at 8am in Wellington, from 71.64 cents late yesterday. The trade-weighted index was at 75.37 from 75.39 yesterday.

The kiwi came under some pressure after the GDT price index fell 1 per cent in the GlobalDairyTrade auction overnight, while whole milk powder declined 0.5 per cent to US$3,014 (NZ$4,210) a tonne, despite the futures pointing to an increase. It came under further pressure when Federal Reserve Bank of Philadelphia President Patrick Harker said Tuesday he thinks one more increase in interest rates is appropriate this year.

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However, it remained largely rangebound as the country waits for NZ First leader Winston Peters to decide which party he will form the next governing coalition with. Late Wednesday, Peters said his party is moving as fast as it can to decide on the next government and "we are just asking for a bit of patience." Peters has said a decision on the make-up of the next government was likely sometime this week.

The kiwi "is a bit weaker so we may be getting close to an announcement," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank. However, it's largely treading water as "everyone is just waiting, it's in a holding zone," he said.

The kiwi rose to 54.29 British pence from 54.04 pence yesterday and was at 91.16 Australian cents from 91.26 cents yesterday. It traded at 4.7317 yuan from 4.7290 yuan and rose to 80.34 yen from 80.27 yen. It traded at 60.82 euro cents from 60.81 cents.

New Zealand's two-year swap rate was unchanged at 2.19 per cent and 10-year swaps fell 2 basis points to 3.17 per cent.