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


NZ dollar gains as Brexit-induced volatility eases

Wednesday 29 June 2016 05:09 PM

NZ dollar gains as Brexit-induced volatility eases

By Paul McBeth

June 29 (BusinessDesk) - The New Zealand dollar gained as the extreme level of volatility in financial markets since last week's British vote to quit the European Union eased a little, though the prospect of another rate cut could ensure any rally is short-lived.

The kiwi increased to 70.75 US cents at 5pm in Wellington from 70.39 cents at8am, and 70.44 cents yesterday. The trade-weighted index rose to 75.90 from 75.70 yesterday.

Stocks across Asia gained as investors recover from last week's shock 'Brexit' vote and nervousness about what that might mean for financial markets eases, boosting demand for risk-sensitive assets such as the kiwi. The Chicago Board Options Exchange's Volatility Index, known as Wall Street's 'fear gauge', dropped 21 percent to 18.75 yesterday, indicating volatility in markets has eased. Demand for New Zealand's currency probably won't last long with an interest rate cut next month likely to follow the turmoil stoked by the British referendum.

"The extreme volatility and shock of exiting has run its course, but's we're still going to see heightened levels of volatility," said Michael Johnston, senior deal at HiFX in Wellington. "That's going to limit how far the kiwi can rally in the near term."

The kiwi rose to a new three-year high against the British pound, trading at 53.09 pence from 52.98 pence yesterday.

In its statement of intent for 2016-2019, the Reserve Bank today reiterated that more cuts to the 2.25 percent official cash rate may be needed and that it's investigating new macroprudential tools to deal with the housing market. Separately, Finance Minister Bill English told Bloomberg the central bank has room to cut rates in response to the UK vote.

HiFX's Johnston said if the RBNZ is confident it can implement new tools to take the steam out of the housing market and if July data shows inflation is still benign, governor Graeme Wheeler will cut rates at the Aug. 11 meeting.

New Zealand's two-year swap rate increased three basis points to 2.21 percent, and 10-year swaps gained three basis points to 2.64 percent.

The local currency rose to 95.53 Australian cents from 95.34 cents yesterday and climbed to 4.7081 Chinese yuan from 4.6824 yuan. It increased to 63.96 euro cents from 63.67 cents yesterday and gained to 72.45 yen from 71.83 yen.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Skodafone Goneski: Sky TV, Vodafone Drop $3.44 Billion Merger Plan

Sky Network Television and Vodafone New Zealand have terminated their merger agreement which aimed to create the country's largest telecommunications and media group, and have withdrawn an appeal against the Commerce Commission's rejection of the plan. More>>

Quake Insurance: Reforms To EQC Act Announced

· Increasing the monetary cap from $100,000 (plus GST) to $150,000 (plus GST) for EQC building cover.
· Clarifying EQC land cover is for natural disaster damage that directly affects the insured residence or access to it... More>>


Reserve Bank: Official Cash Rate Unchanged At 1.75 Percent

Global economic growth has increased and become more broad-based. However, major challenges remain with on-going surplus capacity and extensive political uncertainty... More>>

Kaikōura Earthquake: Private Insurers Receive $1.8b Claims

Insurance Council Chief Executive Tim Grafton said most is for commercial loss at $1.36 billion, with residential claims amounting to over $460 million. “...We have a high level of confidence that most people will have received settlement offers by the end of this year." More>>


Forms And Data: New Proposals To Simplify Personal Income Tax

The Government is proposing to make tax simpler for individuals, with people whose only income is from a salary, wages or investments no longer being required to file tax returns to receive tax refunds or to calculate any additional tax. More>>