The New Zealand dollar is heading for a 0.7 per cent gain against the Australian dollar, losing some momentum after Scott Morrison won the caucus vote to be prime minister.
The kiwi traded at 91.20 Australian cents at 5pm in Wellington versus 91.53 cents at 8am and 91.43 cents yesterday. It traded at 90.61 Australian cents last Friday in New York. It fell to 66.41 US cents from 66.68 cents yesterday and was largely unchanged from 66.36 last Friday in New York.
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The Australian dollar fell sharply on political turmoil across the Tasman resulting in Prime Minister Malcolm Turnbull's resignation today.
However, it recovered some of those losses when Morrison, who will be Australia's sixth prime minister in less than 10 years, beat former home affairs minister Peter Dutton and Foreign Minister Julie Bishop to take the nation's top job.
"PM Morrison is the most market-friendly option, having successfully negotiated through multiple portfolios such as Social Security, Border Security, and more recently presiding over a substantial improvement in the budget balance as Treasurer," said Annette Beacher, chief Asia-Pac macro strategist for TD Securities.
"This was a bit of a relief rally ... markets are viewing Morrison as a bit of the status quo outcome," said ANZ Bank New Zealand senior macro strategist Phil Borkin.
Investors will now focus on Federal Reserve chair Jerome Powell who is due to give a speech entitled Monetary Policy in a Changing Economy at the Federal Reserve Bank of Kansas City Economic Policy Symposium, Jackson Hole, Wyoming.
The trade-weighted index declined to 72.08 from 72.26.
The kiwi traded at 74.01 yen from 73.89 yen yesterday and fell to 57.43 euro cents from 57.70 cents. It was little changed at 51.79 British pence from 51.80 pence yesterday and fell to 4.5749 Chinese yuan from 4.5816 yuan.
New Zealand's two-year swap rate rose 1 basis point to 2.02 per cent and 10-year swaps rose 1 basis point to 2.85 per cent.