Dec. 17 (BusinessDesk) – The New Zealand dollar rose to a four-year high against the yen after Japan’s Liberal Democratic party swept to power, mustering enough support to enact sweeping economic reforms and weaken the currency.
The kiwi dollar jumped to 71.33 yen, the highest since September 2008, from 70.57 yen in New York on Friday. The kiwi traded at 84.54 US cents from 84.56 cents on Friday, holding near the highest since September last year.
The LDP and junior partner New Komeito won at least 320 of the 480 seats in the lower house in Sunday's election, a two-third majority, Nikkei reported. That gives it enough power to pass laws even in the face of opposition in the upper house. The kiwi dollar has advanced ahead of data this week that’s expected to show the economy continued to grow in the third quarter while the current account deficit shrank.
“With the LDP party gaining an outright majority in the weekend’s Japanese elections, further NZD/JPY gains appear to be in store,” said Mike Jones, strategist at Bank of New Zealand.
The next test for the yen will be the Bank of Japan’s policy decision on Thursday, and “Friday’s lacklustre Tankan data has all but cemented further easing,” Jones said.
The New Zealand economy probably slowed to a 0.5 percent pace in the third quarter, from 0.6 percent three months earlier, according to a Reuters survey, as retail spending fell and agricultural production eased from its first-half highs, offsetting a strong pickup in construction activity. The figures are released on Thursday.
Data on Wednesday is expected to show the current account deficit widened to $4.83 billion in the three months ended Sept. 30 from $1.8 billion in the second quarter. The annual deficit narrowed to $9.83 billion, or 4.8 percent of GDP, from $10.1 billion, or 4.9 percent.
The New Zealand dollar rose to 80.13 Australian cents from 80.04cents and fell to 64.13 euro cents from 64.24 cents. The local currency eased to 52.28 British pence from 52.31 pence.
The trade-weighted index rose to 75.45 from 75.31.