The New Zealand dollar fell as the US Federal Reserve signals on balance sheet unwinding and interest rate hikes outweighed gains made earlier in the week after a poll showing the National Party in the lead ahead of tomorrow's vote.
The kiwi fell to 73.11 US cents as at 8am in Wellington from 73.21 cents late yesterday. The trade-weighted index was at 76.48 from 76.53.
The Federal Open Market Committee reiterated its projection for a third rate hike this year and more increases in 2018 while pointing to an October start date for trimming its US$4.5 trillion stockpile of government bonds and mortgage-backed securities. At home, a Newshub Reid Research poll put support for National at 45.8 per cent and Labour's on 37.3 per cent, meaning both parties would probably need to rely on New Zealand First, on 7.1 per cent, to form the next government.
The Greens were also on 7.1 per cent. The kiwi rose on Wednesday after the 1News Colmar Brunton showed National on 46 per cent to Labour's 37 per cent.
"New Zealand might be set for a market-friendly election result but the bigger picture is being dictated by the FOMC," said Cameron Bagrie, chief economist at ANZ Bank New Zealand. "The Fed stuck to its guns that rates are going higher and balance sheet reduction is around the corner. Expect strength in the NZD/USD to continue to wilt as the USD firms."
