New Zealand Dollar Rises on Weaker Greenback

The New Zealand dollar slipped to around $0.554, hovering at its lowest level since April 2025 as the US dollar strengthened on increased bets for a Federal Reserve rate hike in December. Hotter-than-expected October inflation report, coupled with hawkish remarks from several Fed officials, fueled expectations of tighter US monetary policy. The greenback's strength outweighed support from preliminary election results in New Zealand showing the incumbent National-led coalition could retain power, which would likely ensure continuity in the Reserve Bank’s sole focus on inflation and the government’s spending policies. Conversely, the main opposition Labour Party’s plan to reinstate the central bank’s dual mandate of price stability and employment was viewed as a potential drag on the currency, as it could tilt monetary policy in a dovish direction given persistent weakness in the labor market. However, the outcome remains uncertain, with official results due on November 27.

The New Zealand dollar hovered around $0.560, holding on to most of its gains from earlier this week, as the incumbent National Party gained an early edge in its bid to retain power. Although the final outcome remains uncertain until official results are released on November 27, the National-led coalition holds a slim lead in the race for a parliamentary majority, raising expectations that the Reserve Bank's current inflation-focused mandate will be retained. Meanwhile, a Labour-led administration had been viewed as a potential headwind for the kiwi, given its plan to restore the central bank's dual mandate of price stability and employment, a move that could encourage a more accommodative monetary policy amid weak labor market conditions. The kiwi also drew support from improved risk appetite after President Trump indicated that further military action on Iran was unlikely as long as talks continued, easing fears of an escalation in regional tensions.

The New Zealand dollar rose to $0.560 on Monday, rebounding from a more than one-and-a-half-year low hit on Friday, as preliminary election results gave the incumbent National Party a path to remain in power. Neither major party secured an outright majority in the weekend election, with Prime Minister Christopher Luxon’s centre-right National Party winning 42 seats, compared with 36 for the main opposition Labour Party. However, National and its existing coalition partners, ACT and New Zealand First, are projected to hold a combined 67 seats in the 131-member Parliament, just one above the majority threshold. The prospect of political continuity eased concerns over a potential shift in monetary policy under a Labour-led government, which had pledged to restore the Reserve Bank’s dual mandate. Still, the outcome remains uncertain, as nearly 400,000 special votes are yet to be counted, while formal coalition talks will not begin until the final results are announced on November 27.