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FILE PHOTO - Winston Peters, leader of the New Zealand First Party, speaks during a media conference in Wellington, New Zealand, September 27, 2017. REUTERS/Charlotte Greenfield/File photo(reuters_tickers)
WELLINGTON (Reuters) - New Zealand's small nationalist party, which holds the balance of power after last month's inconclusive elections, will make an announcement on Thursday on the result of talks with the two major parties to form the next government.
The move should put an end to weeks of political uncertainty in the small Pacific island nation, after neither major party won enough seats on Sept. 23 to form a government, leaving both courting the leader of New Zealand First, Winston Peters.
"New Zealand First will be in a position tomorrow afternoon to make an announcement on the result of negotiations following the 2017 general election," the party said in a statement.
Thursday's event could also shed light on the economic direction for New Zealand, since both the National Party and the Labour Party differ on immigration and trade, key sources of the country's robust growth in recent years.
Peters has held lengthy talks with both National, which has been in power for nearly a decade, and opposition Labour, but has kept his cards close to his chest regarding coalition prospects.
Peters has notified the leaders of both parties about Thursday's announcement, the statement added.
The New Zealand dollar, already under pressure earlier on Wednesday, briefly fell to the day's low of $0.7153 after the statement.
"If it goes down the path of a Labour-Green coalition, we can expect the kiwi will probably come under far greater pressure, purely on the basis that that is a complete unknown," said Stuart Ive, a dealer at OM Financial.
"If it's announced that a National coalition is being formed, we can probably see the kiwi pick back up again," in a short relief rally before markets return to focussing on economic fundamentals, he added, using the currency's nickname.
NZ First has more in common with Labour on the policy front, as both want to rein in immigrants and foreign ownership, change certain trade deals and adjust the central bank's mandate.
But some analysts say a two-way coalition with National would be more straightforward than a three-way coalition with Labour and the Greens. Labour needs the seats of both the Greens and New Zealand First to reach a majority in parliament.
(Reporting by Ana Nicolaci da Costa and Charlotte Greenfield; Editing by James Dalgleish and Clarence Fernandez)