NZ dollar edges higher in lead-up to US election

The New Zealand dollar edged higher against the greenback as Hillary Clinton's lead in polling ahead of the US presidential election bolstered investor sentiment in the tightly contested race.

The kiwi increased to 73.22USc from 73.15USc yesterday, and the trade-weighted index gained to 78.57 from 78.48.

Mrs Clinton held a three-point lead over rival Republican candidate Donald Trump in the final Bloomberg Politics national poll ahead of the November 8 vote after the Federal Bureau of Investigation yesterday said it has no reason to pursue criminal charges against the Democrat nominee. That boosted investor optimism, which has been spooked by the prospect of a protectionist Trump presidency, with stock markets in Wall Street and Europe carrying on a rally that started in Asia yesterday. The Chicago Board Options Exchange Volatility Index, or VIX, known as Wall Street's fear gauge, dropped from a four-week high.

"The US goes to the polls tonight, with results expected to dribble out from early tomorrow afternoon (NZT)," Bank of New Zealand market strategist Kymberly Martin said in a note. "A convincing Clinton win would likely see a further rebound in risk appetite, and the NZ dollar supported. Alternative outcomes (unclear result or Trump victory) would likely result in the more pronounced market response. Risk appetite would be damaged and the NZ dollar put under pressure."

The outcome of the US election will be weighing on New Zealand's Reserve Bank which will make its final policy review of the year on Thursday. Governor Graeme Wheeler is expected to cut the official cash rate a quarter-point to a new record-low 1.75%, though strength in recent economic data releases has prompted bank economists to view that as the end of the easing cycle. Further complicating the review was a revision by Statistics New Zealand yesterday to the consumers price index, which indicated more inflation in the September quarter than previously reported.

Reserve Bank deputy governor Grant Spencer is also scheduled to deliver a speech to the Payments NZ conference today entitled 'Innovation with resilience – a central banker's perspective'.

The local currency fell to 94.90Ac from 95.36Ac yesterday and gained to ¥76.46 from ¥76.26. It increased to 66.32 euro cents from 66.06 cents yesterday and advanced to 59.05 British pence from 58.73 pence. The kiwi was little changed at 4.9572 Chinese yuan from 4.9570 yuan yesterday.

(BusinessDesk)