NZ dollar firms v Aussie in muted response to election

Fletcher Building's decline has dragged the sharemarket lower at the opening, post-election.

The New Zealand dollar rallied against the Australian dollar and 10-year Government bond yields dropped a little but it was a largely muted market response to Saturday’s general election, which will usher in a new National Party-led government.

By late afternoon the NZ/Aussie dollar cross rate was at A93.70c from Friday’s close of A93.45c but off its earlier A93.90c post election peak.

Key 10-year bond yields were down five basis points at 5.39 per cent.

“It could well be a reflection of the partial removal of the uncertainty,” Westpac senior strategist Imre Speizer said.

Speizer pointed out the coalition has yet to be formed and there are still special votes to be counted.

“But a decent chunk of uncertainty has been removed and we now know that we will be moving to a more centre-right government,” he said.

Against the US dollar, the Kiwi was also firm, trading at US59.15c from US58.85c late on Friday, but most likely in reaction to US dollar weakness.

BNZ senior market strategist Jason Wong said the overall market reaction was muted but that the change of government was likely to be supportive for business confidence, which may in turn mean a firmer currency.

Saturday’s election delivered a result that was broadly in line with the polls, and one that is set to bring a change in government from a Labour government to a National-led coalition.

The sharemarket, which often registers a mild bump after an election, was instead dragged lower by Fletcher Building when it came off a three-day trading halt.

Fletcher Building, which was suspended from trading on Wednesday on the back of claims from Western Australia building firm BGC that its Iplex pipes were defective, tanked when trading resumed.

By late afternoon, the stock was off is session lows but was still weak at $4.30, down 60c or 12.2 per cent.

“The action is all about the market not having certainty about Fletcher Building,” Harbour Asset Management portfolio manager Shane Solly said.

About half a million special votes are still to be counted from Saturday’s election, and a clear result will not be known until November 3.

As it stands, the current results show National and ACT could govern alone, but special votes could see NZ First needed.

Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.