The New Zealand dollar touched a fresh three-year high against the British pound after the Bank of England signalled it planned to cut interest rates to counter the impact of the UK's decision to leave the European Union.
The kiwi reached 53.87 British pence, and was trading at 53.60 pence at 8am in Wellington, from 52.88 pence at 5pm yesterday. The local currency advanced to 71.36 US cents from 70.86 cents yesterday.
The appeal of the New Zealand and Australian dollars lifted as traders turned their focus to the likelihood of central banks cutting interest rates further to provide monetary stimulus to economies hurt by last week's Brexit vote. Bank of England governor Mark Carney said the central bank will probably need to pump more stimulus into Britain's economy over the northern hemisphere summer, while a Bloomberg report suggested that the European Central Bank is also weighing more stimulus.
"The Bank of England's plans to ease monetary policy was positive for risk appetite and led investors to think that other central banks will follow causing the focus to shift to the ECB after a Bloomberg report that they could weigh loosening its quantitative easing rules," Kathy Lien, managing director of FX strategy at BK Asset Management in New York, said in a note. "The yield premium offered in Australia and New Zealand has become more attractive with the dovish rhetoric."
Still, BK's Lien said June manufacturing data due to be released from China today could "scuttle the rally" in the Australasian currencies. Scheduled for release at 1pm, the Chinese performance of manufacturing index is expected to slip to 50.0 from 50.1, where a reading of 50 separates a contraction from an expansion. Australia's PMI for June is due out at 11:30am.
The New Zealand dollar gained to 95.63 Australian cents from 95.25 cents yesterday, rose to 64.31 euro cents from 63.81 cents, advanced to 73.69 yen from 72.79 yen, and increased to 4.7445 yuan from 4.7074 yuan. The trade-weighted index gained to 76.38 from 75.80.