Currency talk: The morning after for the kiwi

Join BNZ's Jason Wong and NBR's Jason Walls for Currency Talk. With special feature audio.

The New Zealand dollar has continued climbing against the British pound in the aftermath of the Brexit, reaching a three-year high against the UK currency.

At just under 53p, the kiwi has appreciated 11% against the pound since before the Brexit results hit headlines on Friday.  

BNZ currency strategist Jason Wong tells Currency Talk the appreciation of the kiwi against the pound was “one of the biggest moves in the cross rate by historical standards.”

He says the UK has entered a period of uncertainty and the currency market will be volatile for a while.

“In this environment where the world outlook looks more volatile, risk appetite is softer and that tends to hit the New Zealand dollar,” he says.

The kiwi dollar has dropped against the greenback since the Brexit, falling from almost 73c to just above 70c.

Mr Wong says Britain opting out of the EU puts less pressure on the US Federal Reserve to hike interest rates.

“The Fed has had a tightening bias all year but, if you look at market pricing, it has started to price in a chance of an easing of policy.”

He does not think the Fed will be increasing interest rates at all this year given the global environment.

As the pound was plummeting and markets were dropping, the yen was appreciating on Friday.

Mr Wong says the yen is a “safe haven” currency – a place investors flock to in times of uncertainty.

But he says the Japanese won’t be happy with the appreciation of the currency.

“Japanese officials have been looking at getting inflation up and the economy to rebound. A stronger yen is not going to do that.” 

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