NZ dollar slides after PM John Key's surprise resignation

The New Zealand dollar fell to as low as US$0.7070, in its the biggest percentage drop since Nov 11.
The New Zealand dollar fell to as low as US$0.7070, in its the biggest percentage drop since Nov 11. PHOTO: REUTERS

WELLINGTON (REUTERS) - The New Zealand dollar skidded nearly 1 percent on Monday (Dec 5) after Prime Minister John Key announced his surprise resignation and as global investors drove to safety after Italian Prime Minister Matteo Renzi said he would step down following a stinging defeat on constitutional reform.

The New Zealand dollar fell to as low as US$0.7070, in its biggest percentage drop since Nov 11.

"We've had political stability in New Zealand now for a number of years. That may not change significantly, but the resignation does add a little bit more uncertainty to the political environment that we're used to," said Mr Philip Borkin, senior economist at ANZ.

"It's one of the reasons that the currency is a bit off."

Mr Key, who won praise for his economic stewardship after the global financial crisis, announced his resignation on Monday, saying it was time to leave politics after more than eight years in power.

Also hurting the currency and other riskier assets was the Italian voters' rejection of reforms, threatening to destabilise the country's shaky banking system and ultimately usher in an anti-EU government.

The euro slipped to its lowest against the kiwi since May 2015 and was last down 0.2 percent at NZ$1.4891.

 

The kiwi fell 0.7 percent on the yen, which is considered a safe haven bet during times of uncertainty.

The Australian dollar was off 0.4 percent at US$0.7424, snapping two straight days of gains.

It did better against the Kiwi, rising 0.6 percent to a one-month high. The euro also fell 0.9 percent against the Aussie to stay near a 1½ trough.

New Zealand government bonds gained on a safe-haven bid, sending yields down about 4 basis points at the long-end of the curve.

Australian government bond futures rose, with the three-year bond contract up 3 ticks at 98.040. The 10-year contract climbed 7 ticks to 97.24.