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NZ dollar holds gains as efforts to soothe Brexit pains calm investors

Thursday 6th September 2018

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The New Zealand dollar held overnight gains as positive headlines overnight about Brexit negotiations boosted global risk appetite. 

The kiwi traded at 65.84 US cents at 5pm in Wellington from 65.97 cents at 8am, and up from 65.55 cents yesterday. The trade-weighted index advanced to 71.59 from 71.26 yesterday.

The local currency benefitted from improving risk appetite after Bloomberg reported the British and German governments pulled back on key Brexit demands, potentially easing the path for the UK to strike a deal with the European Union. While the headlines were denied by German officials, risk appetite remained buoyant, keeping the greenback under pressure. 

"It was up overnight on a falling US dollar, some of which was due to the Brexit headlines. Emerging currencies have stabilised for now, helping a risk-on mood for the NZD," said Imre Speizer, head of NZ strategy at Westpac Banking Corp.

The kiwi was also been supported by reports the US and Canada have made progress in talks to revise the North American Free Trade Agreement.

Domestically, investors are looking forward to an on-the-record speech from Reserve Bank governor Adrian Orr tomorrow entitled "Geopolitics, New Zealand and the Winds of Change" for clues about whether he still thinks a rate cut is possible in New Zealand. Investors are currently pricing in a 50 percent chance. 

The kiwi rose to 91.76 Australian cents from 91.16 cents yesterday after Australia & New Zealand Banking Group and Commonwealth Bank of Australia joined Westpac in raising variable mortgage rates across the Tasman. The Reserve Bank of Australia kept the target cash rate at 1.5 percent on Tuesday, noting that mortgage rates were still lower than a year earlier. 

The local currency increased to 73.32 yen from 73.11 yen yesterday and gained to 4.5015 Chinese yuan from 4.4819 yuan. It was almost unchanged at 50.99 British pence from 50.97 pence yesterday and traded at 56.60 euro cents from 56.54 cents.

New Zealand's two-year swap was unchanged at 1.96 percent. The 10-year swap decreased 1 basis point to 2.79 percent.


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