Kiwi falls toward 18-month low vs pound on Brexit optimism

It was little changed against the greenback.

The kiwi fell toward an 18-month low against the British pound on optimism the UK is overcoming hurdles to its European Union exit and was little changed versus the greenback after stronger US data.

The kiwi traded at 51.29 British pence as at 8am in Wellington from 51.55 pence late yesterday. It reached 51.16 pence on Nov. 17, the lowest since June 2016, when the UK voted to withdraw from the EU. The kiwi traded at 68.87 US cents from 68.88 cents yesterday and the trade-weighted index was at 72.70 from 72.68.

Optimism progress is being made on Brexit was stoked by comments from Ireland’s EU Commissioner Phil Hogan that he expected "movement" on the issue of the Irish border in the next few days, which has been a sticking point. British Prime Minister Theresa May is expected to meet  European Commission President Jean-Claude Juncker at the start of the week and is expected to put forward the formal proposal for a 'divorce' ahead of a summit on Dec. 14 and the start of trade talks.

"The market is obviously taking a positive view that a key stumbling block – the Irish border issue – will be resolved early next week that will allow trade talks to finally begin," said Jason Wong, currency strategist at Bank of New Zealand. The "positive vibe around Brexit negotiations" has lifted the pound although "there's still a long, long way to go," he said.

The New Zealand dollar didn't move much against the US dollar after US gross domestic product was revised up to a pace of 3.3 percent in the third quarter while pending home sales jumped 3.5 percent in October, more than three times the pace expected. Meanwhile, departing Federal Reserve chair Janet Yellen said economic growth was "increasingly broad-based across sectors as well as across much of the global economy.”

In New Zealand today, traders will be watching for October building permits and the ANZ Business Outlook for November for any signs that sentiment is changing with the new government.

The kiwi dollar traded at 90.89 Australian cents from 90.80 cents and at 58.07 euro cents from 58.12 cents. It rose to 4.5523 yuan from 4.5455 yuan and rose to 77.05 yen from 76.78 yen.

(BusinessDesk)