NZ dollar falls from 14-month high against greenback; pound strengthens

Wednesday 13th July 2016

The New Zealand dollar fell as traders booked profits following a run that took the kiwi to a 14-month high against the greenback.

The kiwi traded at 72.58 US cents at 5pm in Wellington from 72.96 cents at 8am and 72.63 cents yesterday, having peaked at 73.23 cents in overnight trading. The trade-weighted index fell to 77.44 from 77.53.

Share markets around the world have risen since late last week as investors started to shrug off the June 24 decision of the British electorate to vote to leave the European Union and have turned to riskier assets like equities rather than government bonds.

"The European markets have been strong since last Thursday, there's been a good bit of risk appetite coming back into the market and we've seen some movement by traders and speculators to take profits," said Sheldon Slabbert, sales trader at CMC Markets NZ. "Risk factors have been quelled for the time being and markets are anticipating central bank intervention."

The kiwi continued to decline from recent highs against the British pound, falling to 54.52 pence from 55.57 pence yesterday. Prime Minister David Cameron is to deliver his resignation to the Queen overnight, while the Bank of England is scheduled to announce its decision on interest rates in the early hours of Friday, NZ time.

Slabbert said it was too early to call bottom on the pound: "we may get a surprise cut by even 50 basis points, it could go either way with the Bank of England". Interest rates in the UK have remained at 0.5 percent since March 2009.

New Zealand's two-year swap rate fell two basis points to 2.2 percent and 10-year swaps rose three basis points to 2.57 percent.

The kiwi continued its rise against the Japanese yen, trading at 75.59 yen from 74.82 yen following the Japanese government's weekend election win that opens the doors to further government spending and expansionary monetary policy. It was virtually unchanged against the euro at 65.61 cents from 65.54 cents and similar against the Chinese yuan at 4.8518 yuan from 4.8560 yuan.

The local currency extended its decline against the Australian dollar, falling to 95.41 cents from 95.75 cents yesterday.

BusinessDesk.co.nz

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