WELLINGTON (Reuters) - A small New Zealand party that holds the balance of power after an inconclusive election will hold a fourth day of talks aimed at helping to form a government on Wednesday, one day after it said it had delayed a decision on which party it would back.
Winston Peters, the leader of the nationalist New Zealand First party, told local media on Tuesday evening that he would not be ready to announce his choice by Thursday - a self-imposed deadline.
With neither the ruling National Party nor the opposition Labour Party gaining enough seats to form a government at the Sept. 23 vote, both are reliant on New Zealand First, which has in the past worked under governments from both sides.
The New Zealand dollar NZD=D4 has fallen around 3.7 percent since the election against the U.S. dollar. The political uncertainty this week took the currency to its lowest levels since late May at $0.7052.
The currency hit a low of $0.7056 overnight and was last up 0.11 percent at $0.7072.
“Coalition talks may be completed by Thursday, but the outcome is now not expected until sometime after that,” BNZ bank said in a research note. “So the uncertainty of government formation will hang over the NZD for a while yet.”
That uncertainty has been compounded by concerns that a government including the nationalist New Zealand First would lead to more economically interventionist policies.
NZ First has said it favours more central bank intervention in the foreign exchange market.
On Tuesday, Peters fuelled those concerns by telling reporters that exporters would welcome the recent fall in the local dollar, adding: “If you’re an export-dependent nation, why would you persist with an inflated dollar?”
Reporting by Ana Nicolaci da Costa; Editing by Gareth Jones