Brexit fears pushes Kiwi dollar to highest level in over a year

The kiwi hit 50.08 British pence, its highest level since April last year, and was trading at 49.48 pence at 8am in Wellington, from 49.57 pence at 5pm yesterday.
The kiwi hit 50.08 British pence, its highest level since April last year, and was trading at 49.48 pence at 8am in Wellington, from 49.57 pence at 5pm yesterday.

The New Zealand dollar popped above 50p overnight on concern the UK may vote to leave the European Union in the "Brexit" referendum next week.

The kiwi hit 50.08p, its highest level since April last year, and was trading at 49.48 pence at 8am in Wellington, from 49.57 pence at 5pm yesterday. The local currency was little changed at 70.44 US cents from 70.34 cents yesterday.

The British pound has collapsed as recent polls show the 'leave' vote is picking up momentum leading into the June 23 referendum.

See live rates for the NZ-US $ below. Click for more information:NzForex Foreign Exchange Transfers

That's prompting concern not only about the impact on the UK economy, but a possible fracture of the wider European Union.

Investors are also reluctant to take positions ahead of the Federal Reserve interest rate decision on Thursday New Zealand time, boosting the appeal of safe haven assets such as gold, the Japanese yen and the Swiss franc.

"The market is bracing itself for several key events," said Martin Rudings, senior dealer, foreign exchange at OMF.

"We have an increase in volatility through the market and a lack of liquidity and essentially people are taking risk off the table. Money is pouring into safe haven assets. It's a very difficult week to navigate and I think a lot of people are sitting on their hands. It's very confusing and not for the faint hearted."

OMF's Rudings said the kiwi and Aussie were being held up by their relatively higher yields.

He said some certainty would return for the path of the US dollar after the Federal Reserve decision.

The kiwi could potentially jump to 52 British pence should the UK vote to leave the EU, and would likely fall to about 49 pence if the UK remains, he said.

Once decisions on these two events were known, investors would turn their focus to the US elections, he said.

In New Zealand today, data is published on May food prices.

The New Zealand dollar was little changed at 95.31 Australian cents from 95.33 cents following the Queen's Birthday public holiday in Australia yesterday. Australia has business confidence data scheduled for release today.

The local currency fell to 62.34 euro cents from 62.53 cents yesterday. It gained to 4.6366 yuan from 4.6318 yuan, and was little changed at 74.49 yen from 74.50 yen. The trade-weighted index edged up to 75.26 from 75.19.

- BusinessDesk

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