The Kiwi dollar dropped by 1.2% from $0.7003 to $0.6917 against the US dollar after the incoming prime minister and deputy minister signed a coalition deal in Wellington on Tuesday. The deal formalises the Labour-New Zealand First coalition government.

The dollar has lost nearly 5% after the party gained power following last month’s election.

The government committed to reduce immigration, raise minimum wage and ban foreigners from buying homes – a move that has been seen as unfriendly to foreign investment and immigration.

The government, led by Jacinda Ardern, has also said it would stick to its promises to invest more in core public services.

Labour came second in the September elections, behind the National Party. With no party able to secure a majority, Labour gained power after the New Zealand First party agreed to join them in government. The new coalition is also supported by the Green Party.

Earlier this month, the country delivered its third fiscal surplus which the now outgoing finance minister said “should be interpreted with caution”.

The country’s net debt was reduced to 22.2% of GDP, the finance minister announced.