NZ dollar jumps above 50 British pence

The New Zealand dollar popped above 50 British pence overnight on concern the UK may vote to leave the EU in the so-called 'Brexit' referendum next week.

The kiwi hit 50.08 British pence, its highest level since April last year, and was trading at 49.48 pence at 8am in Wellington, from 49.57 pence at 5pm yesterday. The local currency was little changed at 70.44USc from 70.34USc yesterday.

The British pound has collapsed as recent polls show the 'leave' vote is picking up momentum leading into the June 23 referendum. That's prompting concern not only about the impact on the UK economy but also a possible fracture of the wider European Union. Investors are also reluctant to take positions ahead of the Federal Reserve interest rate decision on Thursday New Zealand time, boosting the appeal of safe haven assets such as gold, the Japanese yen and the Swiss franc.

"The market is bracing itself for several key events," said Martin Rudings, senior dealer, foreign exchange at OMF. "We have an increase in volatility through the market and a lack of liquidity and essentially people are taking risk off the table. Money is pouring into safe haven assets. It's a very difficult week to navigate and I think a lot of people are sitting on their hands. It's very confusing and not for the fainthearted."

Mr Rudings said the kiwi and Aussie were being held up by their relatively higher yields.

He said some certainty would return for the path of the US dollar after the Federal Reserve decision.

The kiwi could potentially jump to 52 British pence should the UK vote to leave the EU, and would likely fall about 4p if the UK remains, he said.

Once decisions on these two events were known, investors would turn their focus to the US elections, he said.

In New Zealand today, data is published on May food prices.

The New Zealand dollar was little changed at 95.31Ac from 95.33Ac following the Queen's Birthday public holiday in Australia yesterday. Australia has business confidence data scheduled for release today.

The local currency fell to 62.34 euro cents from 62.53 cents yesterday. It gained to 4.6366 yuan from 4.6318 yuan and was little changed at 74.49 yen from 74.50 yen. The trade-weighted index edged up to 75.26 from 75.19.

(BusinessDesk)