The New Zealand dollar continued to be lower against its major counterparts in early European trading on Thursday, after New Zealand's third largest political party New Zealand First announced the formation of a coalition with Labour, with Jacinda Ardern set to become the Prime Minister.

The leader of the New Zealand First Winston Peters announced his support behind Labour to form a coalition government, after weeks of negotiations.

The new coalition will also be supported by the Green Party.

The news sparked growth fears as the new coalition favors significant cut to immigration quotas and put new controls on foreign ownership of property.

The currency was also hurt by worries over the constitutional crisis between Spain and Catalonia after the Spanish government said it would continue with the procedures set out in Article 155 of the Constitution to restore the legality of self-rule in Catalonia.

Spain prime minister will convene a special Cabinet meeting Saturday to trigger process to take control of Catalonia's powers.

Also in focus is the European Council meeting beginning today, with Brexit talks to be high on the agenda. Although the U.K. wants to begin talks about future relations, the EU 27 is insisting sufficient progress on divorce terms.

The currency has been trading in a negative territory in the Asian session.

The kiwi declined to more than a 5-week low of 79.15 against the yen, off early more than 2-week high of 80.95. The kiwi is seen finding support around the 78.00 mark.

Data from the Ministry of Finance showed that Japan logged a merchandise trade surplus of 670.17 billion yen in September.

That beat forecasts for a surplus of 556.8 billion yen following the downwardly revised 112.6 billion yen surplus in August

The kiwi dropped to 1.1184 against the aussie, its lowest since April 2016. The pair finished Wednesday's trading at 1.0966. Further weakness may take the kiwi to a support around the 1.14 region.

The kiwi lost 1.7 percent to hit near a 5-month low of 0.7027 against the greenback, compared to 0.7149 hit late New York Wednesday. The kiwi is poised to locate support around the 0.69 mark.

The kiwi slid to 1.6801 against the euro, a level unseen since May 2016. The pair was valued at 1.6478 when it closed deals on Wednesday. The next possible support for the kiwi is seen around the 1.70 level.

Looking ahead, U.S. weekly jobless claims for the week ended October 14 and leading indicators for September are set for release in the New York session.

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