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NZ dollar gains vs pound on Brexit Irish border impasse

NZ dollar gains vs pound on Brexit Irish border impasse, falls vs greenback

By Jonathan Underhill

March 1 (BusinessDesk) - The New Zealand dollar rose against the British pound after a draft legal report from the European Commission on Brexit kept Northern Ireland within its common border region along with the rest of Ireland, effectively creating a new border with Britain.

The kiwi gained to 52.34 British pence as at 8am in Wellington from 51.97 pence late yesterday. The kiwi fell to 72.13 US cents, near a three-week low, from 72.24 cents yesterday.

British Prime Minister Theresa May said the EC draft would threaten the UK's constitutional integrity "by creating a custom and regulatory border down the Irish Sea" and "no UK prime minister could ever agree to it." Separately, the EU's chief Brexit negotiator Michel Barnier said a transition deal wasn't guaranteed, suggesting the talks may be long and drawn-out.

"The GBP was the worst performing currency overnight after the EU released its draft legal agreement for Brexit," said Nick Smyth, interest rate strategist at Bank of New Zealand, in a note. He said May is due to outline her vision for Brexit in a speech on Friday "where she is widely expected to make a proposal for ‘managed divergence’ between the UK and the EU."

The kiwi was little changed at 59.07 euro cents from 59.08 cents yesterday. It extended its decline against the greenback in the wake of Federal Reserve chair Jerome Powell's optimistic assessment of the US economy yesterday, which stoked speculation the Fed may be more aggressive in hiking interest rates.

The trade-weighted index declined to 74.31 from 74.40.

Traders may keep an eye on New Zealand's terms of trade for the fourth quarter, due out today, while Australia releases fourth-quarter private capex and China is to release February manufacturing figures.

The kiwi fell to 4.5638 yuan from 4.5710 yuan and decreased to 92.58 Australian cents from 92.72 cents yesterday. It fell to 76.96 yen from 77.45 yen.

(BusinessDesk)

ends

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