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New Zealand dollar set for fifth weekly loss on election jitters, Aussie treads water

[SYDNEY] The Australian dollar edged up on Friday, while its New Zealand peer stared at its fifth weekly loss as investors were jittery before a looming election with polls showing a dramatic surge in support for the opposition.

The New Zealand dollar held at US$0.7176 from Thursday's US$0.7132, the lowest since June 6.

The kiwi lost 4.4 per cent in August, the biggest monthly drop since January 2016. For the week, it is poised to slip 0.8 per cent.

Data out on Friday showed New Zealand's terms of trade in the second quarter rose by less than expected while upbeat first quarter data was revised lower.

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Still, the country's trade position remained relatively strong. "New Zealand's terms of trade didn't hit the record high we thought it would, largely because Q1's large gain was revised lower. However, it is clearly still a positive story overall," ANZ said in a note. "Not only is it a supportive force for national income growth, it underpins NZD valuations. Associated volume figures suggest net exports will make a positive contribution to Q2 GDP growth, as expected."

The kiwi has been sliding since July-end as traders have been skittish ahead of a hotly-contested election between Labour leader Jacinda Arden and Prime Minister Bill English.

The currency came under selling pressure on Thursday after a poll showed support for Labour overtaking the ruling National party, turning the September election campaign on its head, and making the make-up of the next government even more uncertain.

The market was also disappointed by the New Zealand government's pre-election fiscal update last week in which it downgraded the country's growth outlook for this fiscal year and next.

Across the Tasman Sea, the Australian dollar inched higher to US$0.7944 from a one-week low of US$0.7872 touched on Thursday.

The currency is set to end the week little changed. It slipped 0.7 per cent in August after climbing to a two-year peak of US$0.8066 in late-July.

The Aussie sees stiff chart resistance around 80 US cents after repeatedly failing to stay above that level in recent weeks.

Traders will gear up for a busy week of data and central bank events in Australia, with partial indicators in the lead up to the second-quarter gross domestic product on Sept 6.

New Zealand government bonds rose, pushing yields lower across maturities with the 10-year yield down 2.5 basis points on the day.

Australian government bond futures edged higher, with the three-year bond contract up 3 ticks at 98.000. The 10-year contract climbed 4 ticks to 97.3300.

REUTERS