The New Zealand dollar fell to a week-low after Finance Minister Grant Robertson set out the coalition government's fiscal plans, confirming that they would be funded by slower debt repayment, cancelling tax cuts and by ordering ministers to weed out low-priority spending.
The kiwi traded at 68.29 US cents as at 8:30am in Wellington from 68.33 cents just before Robertson's speech was released and down from 68.46 cents late yesterday. The trade-weighted index fell to 72.14 from 72.25.
Robertson told an ANZ Breakfast in Auckland that the new coalition government aimed to move "beyond narrow economic indicators and measures of success, and instead puts the well-being of our people and the environment at the centre." But he also pledged a "commitment to responsible fiscal and economic management" and reiterated plans to overhaul the Reserve Bank Act to "provide monetary policy support to our goal of improving the well-being of New Zealanders, including focusing on maximising employment." More details of the fiscal plans would be in the Half Yearly Economic and Fiscal Update, set for Dec. 14.
Sheldon Slabbert, a sales trader at CMC Markets in Auckland, said the financial markets "have been fairly negative on Labour's policies" but many of the forces driving the kiwi dollar were "already baked into the cake prior to Labour taking over."
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"The kiwi will remain under pressure as interest rate differentials go against us," he said.
The Federal Reserve is expected to hike US interest rates this month while the Reserve Bank reiterated last month that it expected to keep New Zealand rates low "for a considerable period."
Indicators of business confidence suggest the government may need to do more to placate the business community. The kiwi dollar tumbled yesterday after the ANZ Business Outlook showed a net 39 percent of businesses were pessimistic about the year, the lowest level since early 2009, and a decline of 29 points from the previous month.
The kiwi fell to 50.50 British pence from 50.82 pence late yesterday, the lowest since June 2016 when the UK voted to withdraw from the EU, on speculation the UK is overcoming hurdles to the Brexit. It fell to 57.38 euro cents from 57.69 cents, declined to 4.5139 yuan from 4.5215 yuan and rose to 76.88 yen from 76.65 yen. It traded at 90.31 Australian cents from 90.21 cents.