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NZ dollar hits 3-month low vs sterling as 'Brexit' fears recede

Thursday 26th May 2016

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The New Zealand dollar hit a three-month low against the British pound as confidence builds that the country will vote to remain in the European Union, allaying fears about the impact on the economy.

The kiwi touched 45.83 British pence, and was trading at 45.96 pence at 8am in Wellington, from 46.19 pence at 5pm yesterday. The local currency was little changed at 67.65 US cents from 67.51 cents yesterday.

The kiwi was off a touch at to 67.40 US cents after Fonterra Cooperative Group issued its first forecast farmgate milk price for next season at $4.25 per kilogram of milksolids, at the low end of analysts' expectations, which ranged between $4.43/kgMS to $5/kgMS in a BusinessDesk survey.

The pound strengthened after a poll ahead of Britain's European Union membership referendum next month gave a six-point lead to the "in" camp, with 44 percent of respondents in a Survation telephone poll for online brokerage group IG saying they would vote to stay in the EU, compared with 38 percent who wanted to leave. Several bookmakers also widened the odds of the so-called 'Brexit' occurring. That's bolstered investor confidence, with most economists and strategists saying a vote to leave the EU on June 23 would hurt the economy and weaken its currency.

"GBP rallied as markets further priced out 'Brexit'," ANZ Bank New Zealand senior rates strategist David Croy and senior currency strategist Sam Tuck said in a note. "This sent the cross lower but 'Brexit' remains a risk."

 ANZ expects the kiwi to trade between 45.60 pence and 46.50 pence today.

In New Zealand today, the government's 2016 Budget is released at 2pm. 

The New Zealand dollar gained to 93.92 Australian cents from 93.72 cents yesterday, edged up to 60.64 euro cents from 60.54 cents, advanced to 74.51 yen from 74.25 yen and rose to 4.4336 yuan from 4.4272 yuan. The trade-weighted index increased to 72.92 from 72.83 yesterday.

BusinessDesk.co.nz

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