Kiwi gains against £ on BoE view of weak growth ahead

The New Zealand dollar rose against the British pound, touching a post-float high, after Bank of England governor Mervyn King said economic growth is likely to remain weak even as inflation stays above the central bank's target.

The kiwi rose to 54.07 British pence from 53.66 pence at 5pm in Wellington yesterday, having earlier risen to 54.14 pence. The local currency traded at 84.01 US cents from 84.10 cents yesterday.

Mr King says in the BoE's Inflation Report that a prolonged period of above-target inflation "must therefore be considered alongside the weakness of the real economy". The pound fell against the euro and the greenback after the report was released.

"Overnight, all eyes were on the UK," says Mike Jones, strategist at Bank of New Zealand. "A toxic mix of lower BoE growth forecasts but higher inflation took a toll" on the pound.

The kiwi may extend its gains, as "relative growth and monetary policy expectations are both skewed in favour of ongoing NZD/GBP strength", he says. "We forecast 0.5550 by year end."

Traders will be watching for the release of the BNZ PMI report for January today for signs of the strength of the domestic manufacturing sector, which has struggled in the face of a strong New Zealand dollar. The PMI was at 50.1 in December, barely in positive territory.

The kiwi fell to 81.24 Australian cents from 81.31 cents yesterday. It traded at 63.49 euro cents from 52.56 cents. The trade-weighted index rose to 76.24 from 76.17.

(BusinessDesk)

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NZ Market Snapshot

Forex

Sym Price Change
USD 0.7321 -0.0009 -0.12%
AUD 0.9304 0.0023 0.25%
EUR 0.6497 0.0003 0.05%
GBP 0.4835 -0.0005 -0.10%
HKD 5.6750 -0.0072 -0.13%
JPY 86.1730 0.0850 0.10%

Commods

Commodity Price Change Time
Gold Index 1285.9 -6.240 2015-01-28T00:
Oil Brent 49.6 -1.150 2015-01-28T00:
Oil Nymex 44.5 -1.700 2015-01-28T00:
Silver Index 18.1 0.000 2015-01-28T00:

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Symbol Open High Last %
NZX 50 5794.8 5820.0 5794.8 -0.60%
NASDAQ 4740.7 4742.1 4681.5 -0.93%
DAX 10719.4 10728.8 10628.6 0.78%
DJI 17402.9 17484.4 17387.2 -1.13%
FTSE 6811.6 6863.0 6811.6 0.21%
HKSE 24645.2 24739.2 24861.8 -1.03%
NI225 17666.9 17778.8 17795.7 -1.13%