NZ dollar advances ahead of election as weaker data weighs on greenback

The New Zealand dollar advanced as investors bet on stability ahead of the general election tomorrow and as weaker US data weighed on the greenback.

The kiwi rose to 81.43 US cents at 8am in Wellington, from 81.06 cents at 5pm yesterday. The trade-weighted index advanced to 78.48 from 78.28 yesterday.

New Zealand holds its general election tomorrow, with Radio New Zealand’s Poll of Polls, which averages political polls results, signalling the incumbent National-led government and Prime Minister John Key appear likely to be able to form a third term government with voter support at 47.5 percent. The US dollar index, which measures the greenback against a basket of currencies, declined overnight after weaker data on new housing, building permits and Philadelphia factory activity.

“US data generally undershot expectations overnight,” Kymberly Martin, markets strategist at Bank of New Zealand, said in a note.

The BNZ’s Martin said the focus today will be on net migration data for August, which is closely watched by the Reserve Bank given recent strength and is driving up demand in the local economy.

Also scheduled for publication today are reports on consumer confidence and credit card billings.

“Then it will be all eyes on Saturday’s general election results,” the BNZ’s Martin said. “However, if there is no clear majority, negotiations on the final form of government could run into next week.”

The New Zealand dollar slipped to 49.74 British pence from 49.84 pence yesterday ahead of the results of the Scottish vote on independence from the UK.

“The GBP appears to be anticipating a ‘No’ vote to Scottish independence,” said the BNZ’s Martin. “However, a further relief rally could still occur on that outcome. Results will dribble out from early afternoon with the final count being available at 5pm.”

The local currency advanced to 90.60 Australian cents from 90.46 cents yesterday, increased to 88.57 yen from 88.13 yen and was little changed at 63.04 euro cents from 63.02 euro cents.

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