Slim majority for New Zealand’s governing coalition in preliminary count

About 14% of votes remain uncounted in New Zealand’s election. Preliminary results give the ruling coalition a narrow majority, but the outcome is still uncertain. The final tally will decide which political group governs for the next three years.

Voters shifted more support than before towards smaller parties on the ideological flanks in the closest election in years. The result dealt a significant blow to both major parties: the centre-right National Party under Christopher Luxon and the centre-left Labour Party led by Chris Hipkins.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

With 67 seats in an enlarged 131-seat parliament, the governing right-leaning bloc currently has a slim lead. Counting the outstanding votes could reverse that position. Final results are scheduled for 27 November.

NZD/USD trading update

As of publication, the NZD/USD pair trades at 0.5560, up 0.37% on the day.

New Zealand Dollar: Key Questions

The main drivers of the New Zealand Dollar

Economic conditions in New Zealand and central bank policy broadly determine the value of the New Zealand Dollar (NZD), a widely traded currency also known to investors as the Kiwi. Several country-specific factors also influence its movements. China’s economic performance matters because it is New Zealand’s largest trading partner. Negative developments in China are likely to reduce demand for New Zealand’s exports, weighing on its economy and currency. Dairy prices are another important driver, as dairy is New Zealand’s main export industry. Higher prices increase export earnings, supporting the economy and, in turn, the NZD.

RBNZ policy and its impact on the New Zealand Dollar

Keeping inflation within a 1% to 3% range over the medium term, and close to the 2% midpoint, is the objective of the Reserve Bank of New Zealand (RBNZ). The bank sets interest rates accordingly. If inflation is too high, it raises rates to slow the economy. Higher rates also lift bond yields, making investment in New Zealand more attractive and supporting the NZD. Rate cuts, by contrast, generally weaken the currency. Another key influence on NZD/USD is the interest rate differential: the gap between New Zealand’s current or expected rates and those set by the US Federal Reserve.

Economic indicators and New Zealand Dollar valuation

By providing a gauge of economic health, New Zealand’s macroeconomic releases can affect the valuation of the New Zealand Dollar (NZD). Strong growth, low unemployment and high confidence signal a robust economy and support the currency. Rapid economic growth draws foreign investment. If accompanied by elevated inflation, it may also prompt the Reserve Bank of New Zealand to raise interest rates. Weak economic figures, in contrast, are likely to weigh on the NZD.

Risk appetite and New Zealand Dollar performance

When investors see limited risks across markets and remain optimistic about growth, the New Zealand Dollar (NZD) generally gains. Such risk-on conditions tend to improve the outlook for commodities and so-called ‘commodity currencies’, including the Kiwi. Market turmoil or economic uncertainty typically has the opposite effect. Investors tend to sell higher-risk holdings in favour of more stable safe-haven assets, leaving the NZD weaker.