NZ dollar gains vs. British pound after sterling crash

Monday 10 October 2016 08:56 AM

NZ dollar gains vs. British pound after sterling 'flash crash'

By Paul McBeth

Oct. 10 (BusinessDesk) - The New Zealand dollar gained against the British pound as investors continue to weigh up the impact of the UK's exit from the European Union, triggering a brief slump in sterling on Friday.

The kiwi rose to 57.78 British pence at 8:30am in Wellington from 57.56 pence, rising as high as 57.87 pence when the pound sank to a 31-year low in light trading last week. The local trade-weighted index advanced to 76.75 from 76.32 last week.

The British pound dropped 600 basis points on Friday for no apparent reason during the Asian trading session in what's been described as a 'flash crash' by traders. The UK currency has become increasingly volatile since the June referendum in favour of leaving the EU, and Prime Minister Theresa May has indicated the country will focus on curbing immigration over remaining in the single market when it leaves the European pact. The pound recently traded at 1.2408 US cents, dropping as low as 1.18 cents during last week's collapse.

"Whatever the cause, it only served to highlight the perils of the pound and, although it recovered, it still ended the day down 1.4 percent," Bank of New Zealand currency strategist Jason Wong said in a note. "The NZD traded through the GBP crash without much of a hiccup."

The kiwi rose to 71.83 US cents at 8:30am from 71.58 cents on Friday in New York and 71.32 cents at 5pm in Wellington last week after US non-farm payrolls data printed at the lower end of expectations with 156,000 jobs added in September.

Local data today includes electronic card spending in September scheduled for release at 10:45am.

The kiwi dollar was little changed at 94.49 Australian cents from 94.45 cents and rose to 4.7873 Chinese yuan from 4.7733 yuan. It gained to 74.02 yen from 73.66 yen last week and increased to 64.16 euro cents from 63.89 cents.

(BusinessDesk)

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