Dollar rises back above US70c after Cameron says he won't rush for Brexit

The New Zealand dollar rose back above 70 US cents after British Prime Minister David Cameron reiterated he would leave Brexit negotiations to his successor and won't invoke article 50 of the Lisbon Treaty that would begin the process for leaving the regional economic bloc.

The kiwi traded at 70.47 US cents as at 5pm in Wellington, having earlier fallen as low as 69.76 cents, from 70.65 cents yesterday. The local currency traded at 52.93 British pence, having touched a three-year high 53.67 pence overnight, from 52.72 pence yesterday.

Cameron told the British House of Commons that the UK won't trigger a formal exit from the European Union until a new PM takes over, having signalled he will be gone by October. He has resisted calls from European leaders to quickly trigger an exit while saying work is underway to ensure trade relations are in place when any split does occur. Traders are betting the Brexit increases the chances that the US Federal Reserve will hold off on raising interest rates for now and that the Reserve Bank will cut the official cash rate in August.

"Markets in Asia have picked up on the fact that Britain isn't going to sign article 50 until Cameron's replacement is chosen and so it is hard to see where the next piece of negative news is going to come from," said Martin Rudings, senior foreign exchange dealer at OMF. "We might have this relief rally continue overnight."

Rudings said the kiwi may trade in a range of 69.70 US cents to 71.10 cents in the next 24 hours.

Traders are pricing in a 75 percent chance that RBNZ governor Graeme Wheeler will cut the official cash rate a quarter point to 2 percent in the monetary policy statement on Aug. 11. Across the Tasman the Reserve Bank of Australia cut its cash rate by 25 basis points to 1.75 percent on May 4 and Rudings said there is "some talk that the RBA might cut as well in August," Rudings said.

"So we've got to keep up or we will have an appreciating currency," Rudings said. "He's (Reserve Bank governor Graeme Wheeler) got to stack up his cards in order or his projections won't stack up."

The June monetary policy statement projected the Trade Weighted Average would average 72.6 in the second quarter, about 4.2 percent below its current level.

Two-year swaps rose 4 basis points to 2.18 percent today and 10-year swaps fell 1 basis point to 2.61 percent.

The New Zealand dollar was little changed at 95.36 Australian cents from 95.32 cents yesterday. It fell to 63.68 euro cents from 64.14 cents and traded at 71.81 yen from 71.75 yen. The kiwi fell to 4.6844 yuan from 4.6902 yuan. The trade-weighted index dropped to 75.68 from 75.89.

(BusinessDesk)