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NZ dollar rises toward 3-month high vs pound after Moody's cites election impact

Tuesday 13th June 2017

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The New Zealand dollar rose against the pound, edging back toward last week's three-month high, after Moody's Investors Service said Britain's inconclusive election result could delay Brexit and erode its Aa1 credit rating.

The kiwi gained to 56.91 British pence as at 8am in Wellington, from 56.40 pence late yesterday. The local dollar edged up to 72.04 US cents from 71.94 cents.

Moody's said British Prime Minister Theresa May, who is attempting to stitch together a minority government after the election wiped out the Conservatives' majority, may end up leading a government that puts less priority on reducing the budget deficit while talks to exit the European Union could take longer, or result in a weaker form of exit, Moody's said.

"In the absence of any notable economic data releases currency markets have traded in an orderly fashion with the GBP falling further after Moody's warned that UK election outcome would ‘complicate and probably delay’ Brexit negotiations," traders at HiFX said in a note. "Ahead of the shock election result PM May had planned to start the negotiation with the European Union next Monday."

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.

Locally, New Zealand's gross domestic product report on Thursday 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 kiwi traded at 95.43 Australian cents from 95.58 cents yesterday. It rose to 4.8968 yuan from 4.8898 yuan and slipped to 79.14 yen from 79.31 yen. It rose to 64.28 euro cents from 64.16 cents. The trade-weighted index was at 77.55 from 77.45.

(BusinessDesk)

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