The New Zealand dollar rose to a three-month high against the pound on concern an unstable minority government in Britain will be in a weaker position to negotiate an exit from the European Union and may not be able to hold onto power.
The New Zealand dollar rose to a three-month high against the pound on concern an unstable minority government in Britain will be in a weaker position to negotiate an exit from the European Union and may not be able to hold onto power.
The kiwi rose to 57.12 British pence, the highest since mid-March, from 56.40 pence late yesterday. The local dollar edged up to 72.24 US cents, and earlier touched 72.30 cents, the highest since late February, from 71.94 cents yesterday.
The pound extended its decline in Asia today to a two-month low against the greenback as Prime Minister Theresa May tries to stitch up her numbers with the help of Northern Ireland's Democratic Unionist Party. Overnight, Moody's Investors Service said Britain's inconclusive election result could delay Brexit, reduce the focus on trimming the budget deficit and erode its Aa1 credit rating.
"The pound is probably looking a little bit over-valued from here," said Mitchell McIntyre, a dealer at HiFX. "The kiwi dollar is just outperforming. It's a high yielder, it has a strong economy and commodity prices have stabilised."
Confirmation of the New Zealand economy's performance will come on Thursday with the gross domestic product report, which is expected to show the economy grew 0.7 percent in the first quarter, up from a 0.4 percent rate in the fourth quarter of last year, for an annual pace of 2.7 percent.
The main event this week is likely to be the Federal Reserve's Open Market Committee meeting, where a quarter-point increase in the fed funds rate is widely expected and traders will be watching the Fed's forward guidance to try to gauge whether there will be any more hikes this year.
The kiwi traded at 95.59 Australian cents from 95.58 cents yesterday. It rose to 4.9089 yuan from 4.8898 yuan and gained to 79.46 yen from 79.31 yen. It rose to 64.52 euro cents from 64.16 cents. The trade-weighted index was at 77.71 from 77.45.
New Zealand's two-year swap rate was unchanged at 2.19 percent while the 10-year swap rate fell 1 basis point to 3.15 percent.
(BusinessDesk)
