Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ dollar drops to 10-day low as Brexit stokes uncertainty

Monday 27 June 2016 08:44 AM

NZ dollar drops to 10-day low as Brexit stokes uncertainty in financial markets

By Paul McBeth

June 27 (BusinessDesk) - The New Zealand dollar fell to a 10-day low against the greenback after the British public's vote to quit the European Union caught investors off-guard, stoking uncertainty in financial markets and raising the prospect that local interest rates will have to go lower.

The kiwi fell to 70.80 US cents at 8am in Wellington from 71.30 cents on Friday in New York. The trade-weighted index gained to 75.91 from 75.36 last week as investors fled the British pound and euro after UK referendum.

The result saw the Sterling drop about 8 percent in a day and led to a sell-off in stock markets around the world as investors clamoured to the relative safety of the yen and US government bonds. Markets had been betting the public would choose to stay, and the Chicago Board Options Exchange's Volatility Index, known as Wall Street's 'fear gauge', spiked 49 percent to 25.76 on Friday, its highest level since February.

"It’s too early to judge that the worst is over – indeed it probably isn’t over," Bank of New Zealand currency strategist Jason Wong said in a note. "The political turmoil in the UK that has developed over the weekend and the months of uncertainty ahead suggest that a period of subdued risk appetite is likely to develop over coming weeks, which suggests more downside potential for risk assets and the NZD."

New Zealand swap rates tumbled when support for the exit vote became unassailable as investors predict the Federal Reserve will delay its tightening cycle, meaning the Reserve Bank will be more likely to cut the official cash rate when it next reviews policy in August. Two-year swaps were recently at 2.17 percent and 10-year swaps at 2.69 percent.

The Bank for International Settlements said central banks are ready to cooperate to support financial stability in the wake of the vote, which has already prompted currency interventions from the Swiss National Bank and Denmark's central bank.

ANZ Bank New Zealand senior economist Philip Borkin said the 'Brexit' vote will also hit commodity prices and credit markets.

"There would obviously be growth implications from weaker commodity prices, tighter credit markets, and a strong NZD," Borkin said. "Whatever the case, the odds of an August OCR cut have increased."

The local currency climbed 52.44 British pence at 8am in Wellington from 52.11 pence on Friday in New York and gained to 64.30 euro cents from 64.12 cents. It slipped to 95.29 Australian cents from 95.47 cents last week and dropped to 71.99 yen from 72.86 yen. The kiwi dropped to 4.6841 Chinese yuan from 4.7165 yuan last week.

(BusinessDesk)

ends

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Statistics: Business Research And Development Up 29 Percent

Computer services and machinery manufacturing firms led the way in an almost 30 percent lift in business spending on research and development (R&D) in 2016, Stats NZ said today. Businesses spent $1.6 billion on R&D in 2016, up $356 million (29 percent) from 2014. More>>

ALSO:

China Shopping: NZ-China FTA Upgrade Agreed Among Slew Of New Deals

New Zealand Prime Minister Bill English and China Premier Li Keqiang signed off a series of cooperation deals spanning trade, customs, travel and climate change and confirmed commencement of official talks on an upgrade to the nine-year old free-trade agreement between the two countries. More>>

ALSO:

Media: TVNZ Flags Job Cuts To Arrest Profit Decline

Chief executive Kevin Kenrick said the changes were aimed at creating "a sustainable future video content business for TVNZ in an ever-changing media market." More>>

ALSO:

Reserve Bank: Wheeler Keeps OCR At 1.75%

Reserve Bank governor Graeme Wheeler kept the official cash rate unchanged at 1.75 percent, as expected, and reiterated his view that the benchmark rate doesn't need shifting for the foreseeable future. More>>

ALSO:

Trade Plans: Prime Minister's Speech To International Business Forum

"The work to improve public services, build infrastructure, and solve social problems is possible only because we have enjoyed sustained, solid economic growth. A big reason for that is the Government’s consistent agenda of economic reform, and our determination to open up more opportunities for trade with the world." More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news