Dollar hits fresh high on Brexit concerns

The New Zealand dollar hit a fresh nine-month high against the British pound amid concern about a potential British exit from the European Union.

The kiwi touched 47.76 British pence, and was trading at 47.72 pence at 8am in Wellington, from 47.30 pence at 5pm yesterday. The local currency rose to 66.42USc from 66.17USc yesterday.

The British pound, also known as cable, has slumped to a seven-year low against the greenback since high-profile London mayor Boris Johnson said at the weekend he was opposed to UK Prime Minister David Cameron's bid to stay in the EU.

Volatility in the pound is expected to continue leading into the June 23 referendum on the country's EU status.

"Panic is starting to seep into the currency market as fears of Brexit are making their presence felt not only in cable but in euro as well," BK Asset Management managing director of foreign exchange strategy Boris Schlossberg says.

"Investors are becoming increasingly concerned about the prospect of the UK actually leaving the European Union and although the latest polls suggest that the leave vote has lost some momentum over the past several days, the decision remains far too close for comfort as leave and stay camps are essentially evenly split.

“Furthermore fully 25% of the UK electorate has not made up its mind and therefore the sense of uncertainty is adding to the volatility of trade."

"The spectre of Brexit has also opened up a Pandora's box of fears about the European Union itself. Little wonder then that euro has been drifting lower along with the pound as investors grow increasingly wary of the whole region,” Mr Schlossberg says.

He says turbulence in capital markets may make the UK electorate reconsider its choices but until the market believes that there is a sentiment change, the volatility is likely to continue.

In New Zealand today, travel and migration data for January is released at 10:45am, and the Reserve Bank publishes details of high debt mortgage lending at 3pm.

Finance Minister Bill English will give a lunchtime speech to the Auckland Chamber of Commerce, where he will set out the government's economic approach midway through its third term, including its major focus areas and challenges for the coming year.

The New Zealand advanced to 92.29Ac from 92.16c yesterday, gained to 60.23 euro c from 60.05 euro c, was little changed to 74.05 yen from 74.04 yen, and increased to 4.3366 yuan from 4.3206 yuan. The trade-weighted index rose to 72.25 from 72.06 yesterday.

(BusinessDesk)