NZ dollar climbs above 55 British pence as fears heighten over Brexit

The New Zealand dollar climbed above 55 British pence as more UK commercial property funds suspend redemptions in the wake of last month's vote to leave the European Union, stoking fears Britain could tip into recession.

The kiwi touched 55.32 pence, the highest level since April 2013, and was trading at 55.10 pence at 8am in Wellington from 54.78 pence yesterday.

The trade-weighted index declined to 76.27 from 76.54.

The pound slumped to a new 31-year low against the greenback when three more British commercial real estate funds suspending withdrawals in response to a flurry of requests. Six funds holding at least £14.8 billion have been frozen.

Commercial real estate is showing a similar trajectory to the lead-up to the financial crisis almost a decade ago, and raising concerns the UK economy will fall into a recession. The UK's FTSA 100 fell 1.3%.

"Headlines overnight announced that a further three UK property funds suspended redemptions. Six funds have now frozen redemptions, with clear risks of further contagion," Bank of New Zealand senior market strategist Kymberly Martin says. "The British pound is again the weakest performer over the past 24 hours."

The local currency edged lower against the greenback, trading at 71.30USc from 71.40USc yesterday, after minutes from the Federal Reserve's last meeting reinforced expectations US interest rates won't be rising any time soon. That helped push up stocks on Wall Street, with the Standard & Poor's 500 index gaining 0.5%.

Reserve Bank of New Zealand deputy governor Grant Spencer will deliver a speech at 5.30pm on macroprudential policy and the country's housing market risk, which traders will be watching to see whether the central bank will give any guidance on new tools to slow rising property prices.

Prime Minister John Key this week said he'd support a move to introduce more tools, with rising prices seen as restraining governor Graeme Wheeler from cutting interest rates further.

The local currency fell to 94.84Ac from 95.75Ac yesterday and declined to 72.28 yen from 72.61 yen. It dropped to 64.20 euro c from 64.49 euro c and increased to 4.7720 Chinese yuan from 4.7674 yuan.

(BusinessDesk)