NZ dollar pushes above 71 US cents as investors regain confidence after Brexit vote

Thursday 30th June 2016

The New Zealand dollar popped above 71 US cents overnight as investors regained some confidence after the UK last week voted to leave the European Union.

The kiwi touched a high of 71.36 US cents early this morning, and was trading at 71.03 cents at 8am in Wellington, from 70.82 cents at 5pm yesterday. The trade-weighted index edged up to 75.97 from 75.93 yesterday.

Global stock markets rebounded for a second day as concerns eased about the impact of the Brexit vote, lifting oil prices and boosting demand for higher risk currencies such as the kiwi. The prospect of more monetary stimulus following Brexit also helped underpin markets, as Federal Reserve official Jerome Powell said the Brexit vote could slow the US economy, stoking expectations that the Fed may not hike US interest rates this year.

"The recovery continued for risk assets, with the market continuing to reverse the losses seen in the immediate aftermath of the shock UK vote," Bank of New Zealand currency strategist Jason Wong said in a note. "A consensus view is emerging that the shock will be isolated to the UK itself, with little spillover for the rest of the world. Central banks will deliver further easing and, in the case of the Fed, will delay any tightening for potentially a long, long time."

Still, BNZ's Wong said the New Zealand dollar has more downside than upside risk in the second half of this year and he doesn't expect the recovery in risk appetite to extend much further.

In New Zealand today, building consent data for May is released at 10:45am and the ANZ business confidence survey for June is published at 1pm.

The New Zealand dollar declined to 95.48 Australian cents from 95.60 cents yesterday, and slid to 52.88 British pence from 53.09 pence.

The local currency gained to 73.03 yen from 72.45 yen, and advanced to 4.7128 yuan from 4.7094 yuan. It was little changed at 63.94 euro cents from 63.97 cents,

BusinessDesk.co.nz

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