NZ dollar climbs to 7-month high vs British pound on growing fears of no-deal Brexit
By Paul McBeth
July 30 (BusinessDesk) - The New Zealand dollar rose to a seven-month high against the British pound on growing expectations for a no-deal Brexit under the leadership of British Prime Minister Boris Johnson.
The kiwi advanced to 54.22 British pence as at 8am in Wellington from 53.60 pence at 5pm yesterday. It traded at 66.30 US cents from 66.28 cents yesterday ahead of the Federal Open Market Committee's upcoming policy review early Thursday, New Zealand time.
The British pound fell against most currencies overnight, and was recently down 1.3 percent at US$1.222, as investors see a greater chance of Britain leaving the European Union without a deal in place. Johnson told media the existing withdrawal agreement was "dead" but insisted there was scope for a new arrangement to be struck.
"With MPs opposed to a no-deal Brexit, that leaves open the possibility of Johnson attempting to prorogue parliament, in order to force through Brexit by the end of October, or new elections, which would probably be seen as a defacto second referendum," Bank of New Zealand interest rates strategist Nick Smyth said in a note.
"The weakness in the GBP has seen the NZD/GBP cross appreciate more than 1 percent to 0.5420, near its recent highs."
Smyth said the weakness in the pound didn't spill over to wider financial markets as investors await the Federal Reserve's policy decision this week where an interest rate cut is expected.
Australia and New Zealand central banks will review their respective policies next week, with both seen lowering their benchmark rates over the coming year.
Local data today include June building consents.
The kiwi traded 96.06 Australian cents from 95.97 cents yesterday and was at 59.48 euro cents from 59.58 yesterday. It edged up to 72.11 yen form 71.97 yen yesterday and was at 4.5699 Chinese yuan from 4.5690 yuan. The trade-weighted index was at 72.97 from 72.92 yesterday.