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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)

By Charlotte Greenfield and Ana Nicolaci da Costa

WELLINGTON (Reuters) - The leader of the small nationalist party that will decide New Zealand's next government said on Tuesday that exporters should welcome a recent fall in the local dollar following an inconclusive general election.

The New Zealand dollar, or kiwi, fell to its lowest levels since late May on Monday after a final tally of votes at the weekend showed the opposition Labour-Green bloc gaining ground over the ruling National Party, although the latter still has the largest number of seats.

The final tally led to market speculation that New Zealand First, whose support is needed by both parties to gain enough seats to govern under the country's proportional representation system, would be more comfortable joining forces with the centre-left Labour-Green bloc, prompting investors to sell New Zealand assets.

The New Zealand dollar has dropped around 3.7 percent since the election on Sept. 23, hitting a four-month low of low of $0.7052 on Monday. It was trading at $0.7063 on Tuesday afternoon.

"I think exporters will be pleased, we are an export-dependent nation," NZ First leader Winston Peters told reporters after a meeting with Labour, when asked about the currency's decline.

NZ First favours greater central bank intervention in the foreign currency market. The New Zealand dollar was the 11th most traded currency in the world in 2016.

Peters is holding the third day of substantive negotiations with both Labour and National, ahead of his self-imposed deadline of Thursday to announce which party he plans to support. He has in the past served under both National and Labour governments.

Asked whether the talks had included any policies aimed at keeping the NZ dollar down, Peters said: "Well if you're an export dependent nation why would you persist with an inflated dollar, which even the IMF (International Monetary Fund) says is over-valued? Why would you just ignore all the best advice in the world? But then again this is not just an economic matter."

NZ First has more policies in common with Labour than the centre-right, raising jitters in the market about a change in policies after National's decade in power.

Labour supports some changes to the mandate of the RBNZ, lobbying for employment to be added to the central bank's inflation-targeting mandate. Both parties also favour curbs on immigration, foreign ownership and the renegotiation of certain trade deals.

While Peters has kept his cards close to his chest, he told reporters on Monday that foreign ownership restrictions would constitute a large part of the talks.

(Reporting by Charlotte Greenfield and Ana Nicolaci da Costa. Editing by Jane Wardell and Simon Cameron-Moore)

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