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UPDATE 1-NZ opposition Labour looks to nationalist "kingmaker" to form govt

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* Both major parties courting NZ First to form a government

* NZ dollar sees biggest daily loss since mid-May

* English said negotiation talks could take a few weeks

* Some concern over potential demands by kingmaker NZ First

(Recasts with Ardern's comments)

By Charlotte Greenfield and Ana Nicolaci da Costa

WELLINGTON, Sept 25 (Reuters) - New Zealand's opposition Labour leader Jacinda Ardern said on Monday she would seek to form a coalition government with the country's small nationalist party after it was left holding the balance of power following Saturday's indecisive election.

The ruling National Party won the most seats, but failed to secure enough to form government, leaving the nationalist New Zealand First Party leader Winston Peters kingmaker.

Prime Minister Bill English and head of the ruling National Party began courting Winston on election night.

English has said it could take weeks to form a coalition government, with the uncertainty weighing on the New Zealand dollar, which posted its biggest daily drop in over four months.

Peters is a veteran maverick politician who has served as a cabinet minister in both previous National and Labour governments and also said talks would take "two to three weeks".

While Labour trailed the National Party by around 10 points, under the country's German-style proportional representation it could still form government if it goes into coalition with the Green Party and the New Zealand First Party.

"My expectation is over the next couple of days to reach out but I haven't done so yet," Ardern told reporters in Wellington, referring to Winston Peters.

"Our job now is to work with what voters delivered us which was an expectation that a bloc that voted against the status quo to see if we can form a stable coalition government."

National secured 58 seats ahead of the 52 seats from the Green Party and Labour, which experienced a surge in popularity under new leader Ardern. That left both still needing NZ First's nine seats to reach the 61 seats required to form a government. HURTING KIWI

While both National and Labour are expected to adhere to fiscal prudence, they will likely differ on monetary policy, trade and immigration.

Some expect Labour's plans to cut migration and renegotiate some trade policies will hurt two key sources of growth for New Zealand's small, open economy.

There is also some concern about what NZ First will demand in return for supporting the winning party. Peters has lobbied for more currency intervention by the central bank, which would weigh on the Kiwi, the world's 11th most traded currency.

The New Zealand dollar fell 1.19 percent to $0.7254, posting it biggest daily loss since May amid uncertainty over the make-up of the country's next government. "We now wait to find out who is going to form a coalition with NZ First and that may take some weeks," said Stuart Ive, dealer at OM Financial.

A final tally of the election results are due on Oct. 7, when "special votes", which will make up 15 percent of the total and which includes overseas votes, are released. English remains prime minister in the interim. (Reporting by Ana Nicolaci da Costa. Editing by Jane Wardell and Michael Perry)

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