NZ dollar jumps to two-week high vs. British pound after BoE officials damp rate hike speculation

Wednesday 25th November 2015

The New Zealand dollar jumped to a two-week high against the British pound after Bank of England officials pointed to weakness in the UK economy, damping speculation the bank will raise interest rates soon.

The kiwi touched 43.43 British pence and was trading at 43.32 pence at 8am in Wellington, from 43.10 pence at 5pm yesterday. The local currency advanced to 65.34 US cents from 65.24 cents yesterday.

The British pound weakened after BoE chief economist Andy Haldane noted that inflation risks were skewed to the downside and that the central bank must be prepared to act in either direction in order to combat any weakness in the economy. Meanwhile, BoE Governor Mark Carney reiterated a low interest rate environment is likely to remain. The comments cooled expectations that the BoE will follow the Federal Reserve soon in raising rates.

"Although Mr Haldane is the most dovish of BoE members, even a mere suggestion of possible easing at a time when the market anticipates only tightening from the BoE sent (the pound) lower creating jitters amongst currency traders," Boris Schlossberg, managing director of FX strategy at BK Asset Management, said in a note. "Governor Carney offered no help to (pound) bulls when he reaffirmed that rates are likely to remain low for a considerable period of time."

In New Zealand today, the country's largest exporter, Fonterra Cooperative Group, holds its annual meeting of shareholders in Waitoa, Waikato, and the Reserve Bank releases monthly data on high debt mortgage lending.

The New Zealand dollar weakened to 79.98 yen from 80.08 yen yesterday. The yen strengthened as investors sought safe haven assets after Turkey shot down a Russian warplane near the Syrian border, increasing tensions.

The local currency slipped to 90.21 Australian cents from 90.62 cents yesterday. Today, Reserve Bank of Australia assistant governor (financial markets) Guy Debelle speaks in London at an FX Week Europe conference.

The kiwi was little changed at 61.36 euro cents from 61.34 cents, and rose to 4.1741 yuan from 4.1681 yuan. The trade-weighted index was unchanged at 71.02.

BusinessDesk.co.nz

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