Kiwi dollar tumbles along with pound

NZ's financial markets have been relatively unscathed in the fallout from the Brexit. Photo / iStock
NZ's financial markets have been relatively unscathed in the fallout from the Brexit. Photo / iStock

The NZ dollar tumbled more than US3c, or 4.4 per cent, and swap rates dropped as the UK voted to leave the European Union, confounding the predictions of bookmakers and pollsters.

The kiwi fell to US69.84c at 5pm yesterday, from as high as US73c when voting closed at 9am yesterday NZ time and down from US71.80c late on Thursday. The local dollar surged as high as 52.88 British pence, the highest in almost three years, from 48.55p on Thursday.

Financial markets were wrongfooted by the Brexit vote, with polls calling the outcome too close to call as voting got under way and bookmakers predicting strong support for remaining in the EU.

Brexit backer Nigel Farage, of the UK Independence Party, initially conceded defeat. However, six hours later and with the Brexit vote firmly in the lead, the BBC declared the result for the "leave" camp and the British pound dived to a 30-year low.

"The exit polls were completely incorrect on the British elections and quite clearly useless on Brexit.

The market got completely wrong-sided," said Tim Kelleher, head of institutional FX sales at ASB Bank."Across the board, there's risk off."

Kelleher said there's a high probability of intervention in currency markets by central banks, possibly acting in concert. "I don't think the Bank of England has been in yet."

The vote also "puts any chance of a Fed rate hike on the back foot and absolutely puts an August cut by the RBNZ on the cards," he said.

NZ's financial markets have been relatively unscathed in the fallout from the Brexit.

The South African rand and Japan's Nikkei 225 Index tumbled more than 7 per cent, while NZ's S&P/NZX 50 Index has fallen 2.3 per cent. Gold and the yen, seen as safe haven investments, both climbed.

The trade-weighted index was recently at 75.36, having earlier soared to 76.90, from 75.99 on Thursday. The kiwi rose to 63.88 cents from 63.41c and slumped to 71.06 from 75.12 on Thursday. The local currency dropped to 4.6286 yuan from 4.7222 yuan and rose to A95.53c from A95.45c on Thursday.

- BusinessDesk

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