Broadly weaker NZ dollar drops vs pound

Broadly weaker NZ dollar drops vs pound; May seen surviving confidence vote

By Paul McBeth

Dec. 13 (BusinessDesk) - A broadly weaker New Zealand dollar fell sharply against the British pound as traders bet UK Prime Minister Theresa May will be able to survive a 'no confidence' vote, shoring up her position in pursuing a Brexit deal.

The kiwi dropped to 54.23 pence as at 8am in Wellington from 55.09 pence yesterday. It fell to 68.47 US cents from 68.90 cents yesterday, the only G10 currency to decline.

The pound gained 1.1 percent against the greenback as traders bet on May surviving a parliamentary vote of no confidence after she secured enough public support from MPs to win. A victory would give her at least a year before her leadership could be challenged again, strengthening her domestic position in trying to secure a Brexit deal with Europe. May also said she won't fight the 2022 general election.

"The GBP has also recovered sharply, as the market anticipates that Theresa May will win a leadership challenge in a few hours’ time," Bank of New Zealand interest rate strategist Nick Smyth said in a note. "Even if May wins, the margin of victory will still be important, with political commentators suggesting that a large number of votes against her - over 100 - would undermine her credibility in the party and lead to calls for her to resign."

The kiwi was weaker across the board despite improved sentiment among investors on renewed optimism that China and the US will reach a deal to cool their trade tensions. President Donald Trump said he will intervene in the planned extradition of Huawei executive Meng Wanzhou if that helps secure a deal, while the Wall Street Journal reported China plans to offer greater market access to foreign firms. Stocks on Wall Street rose, with the Standard & Poor's 500 index up 1.4 percent in late trading.

Local data today include November food prices. The government will also provide its half-year economic and fiscal update and budget policy statement for 2019.

The kiwi fell to 94.87 Australian cents from 95.42 cents yesterday and dropped to 4.7099 Chinese yuan from 4.7436 yuan. It fell to 77.53 yen from 78.17 yen yesterday and declined to 60.26 euro cents from 60.83 cents. The trade-weighted index fell to 74.78 from 75.35.

(BusinessDesk)

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