FX.co ★ New Zealand Dollar Holds Losses

The New Zealand dollar hovered around $0.555 on Thursday, after declining for the previous two sessions as the US dollar strengthened on growing expectations of a Federal Reserve rate hike in December. Stronger-than-expected US inflation data for October, together with hawkish comments from several Fed officials, reinforced bets on tighter US monetary policy.

In New Zealand, preliminary election results indicating that the incumbent National-led coalition could retain power lent some support to the kiwi, as this outcome would likely preserve the Reserve Bank’s single mandate of inflation targeting and maintain the government’s current spending stance. By contrast, the main opposition Labour Party’s proposal to restore the central bank’s dual mandate of price stability and employment was seen as a potential headwind for the currency, as it might push policy in a more dovish direction amid ongoing labor market weakness.

Nonetheless, the final outcome of the election remains uncertain, with official results due on November 27.