The New Zealand dollar leapt to a 1-1/2 months high on Wednesday after an opinion poll showed the country's ruling National Party had regained a wide lead over the opposition just three days before a nail-biting general election. Support for the National Party rose 6 points to 46 percent while that for Labour slipped seven points to 37 percent, according to One News-Colmar Brunton opinion.
The kiwi dollar jumped to $0.7416, a level not seen since August 7. The currency has been volatile after the opposition Labour party announced Jacinda Ardern as a challenger to Prime Minister Bill English. The race has tightened since, although investors were still uncertain which party would lead the next government.
Across the Tasman Sea, the Australian dollar held above the key level of 80 cents on Wednesday as yields on government bonds hit their highest since late 2015, while more domestic banks predicted the central bank will hike rates next year.
Australian government bond prices have fallen sharply in the past week, outpacing even the drop in US Treasuries. As a result, the spread between local two-year yields and those in the United States has reached its widest since February.
The move is in line with an increase in yields seen in Canada and Britain as central banks there turn hawkish. Higher yields have supported the Australian dollar, which was up at $0.8041 on Tuesday, after rallying to a 2-1/2 year peak of $0.8125 earlier this month. In recent weeks, the kiwi has stumbled when polls indicated a win for Labour, reflecting its promise of tougher fiscal and immigration reform which would hurt economic growth.