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Potential Trump win clips kiwi's wings

NZ NewswireNZ Newswire 9/11/2016 Jonathan Underhill


New Zealand coin is arranged for a photograph in Wellington, New Zealand © Mark Coote New Zealand coin is arranged for a photograph in Wellington, New Zealand

The New Zealand dollar tumbled against the yen as speculation grew that the Republican Party may win not only the White House but achieve a clean sweep with control of the Senate and the House as well, giving it more power to enact policy than President Barack Obama had.

The kiwi fell to 74.66 yen as at 5pm in Wellington from 76.53 yen late yesterday. The local dollar traded at 73.33 US cents from 73.24 cents on Tuesday.

The New York Times has put Donald Trump's chances of winning the US presidency at 91 per cent, while Nate Silver's FiveThirtyEight.com website puts Trump's chances at 61 per cent to Clinton on 37 per cent.

However, FiveThirtyEight.com also projects an 82 per cent chance that the Republicans will win the Senate while the Democrats are on 18 per cent odds.

Meanwhile, bets on a Federal Reserve rate hike next month have collapsed to just 37 per cent from 84 per cent on Wednesday, overshadowing a rate cut expected from the Reserve Bank of New Zealand on Thursday.

"The world didn't end with Brexit and the world won't end with a clean sweep," said Robert Rennie, chief currency strategist at Westpac.

"But the market likes checks and balances in place and it's not obvious that we have that. There will be a tendency for risk markets to err on the underside of caution."

RBNZ governor Graeme Wheeler's policy statement on Thursday may be seen as an added complication that would cause traders to avoid the kiwi, he said.

The trade-weighted index was at 78.66, having climbed as high as 79.03 before poll results started flowing in and from 78.59 on Tuesday.

BNZ governor Graeme Wheeler is expected to cut the official cash rate a quarter-point to a new record-low 1.75 per cent on Thursday in what may be the last step in its easing cycle, although it may officially keep in place the prospect of a further cut to try to prevent the kiwi from rallying.

The New Zealand dollar fell to 58.68 British pence from 59.10 pence on Wednesday and climbed to 96.19 Australian cents from 95.12 cents.

It fell to 65.25 euro cents from 66.36 cents and retraced earlier gains against the Chinese yuan to trade at 4.9639 yuan from 4.9646 yuan. Earlier it reached 5.0032 yuan, the first time in about two years it has exceeded 5.0000 yuan.

New Zealand's two-year swap rate fell 3 basis points to 2.15 per cent and the ten-year swaps fell seven basis points to 2.84 per cent.

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