The New Zealand dollar rose to a two-month high against the British pound after the UK's currency was sold off on concerns about the nation's ability to access the single European market once it leaves the European Union.

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The kiwi rose as high as 57.80 British pence, trading at 57.72 pence as at 8am from 56.82 pence yesterday. It rose to 70.19 US cents from 69.57 cents yesterday.

Britain's pound dropped 1 per cent against the greenback after UK Prime Minister Theresa May told Sky News the country would secure control of its border once it left the EU and then negotiate "the best possible trade deal", stoking fears among investors that May is willing to cede access to the region's single market.

May later talked down how her comments had been interpreted, saying the EU exit meant the relationship will have to change.


"On Sunday, UK PM May was quoted as saying that Brexit negotiations were about 'getting the right relationship, not about keeping bits of membership'," Bank of New Zealand market strategist Kymberly Martin said in a note.

"Consequently, renewed concerns of a 'hard Brexit' likely contributed to the weaker GBP at the start of the week."

The local currency gained against the greenback as yields on US 10-year Treasuries fell 5 basis points to 2.37 per cent, having soared since US president-elect Donald Trump's victory in the Nov. 8 election.

Trump's expansionary fiscal policies and tax reform are seen as encouraging the Federal Reserve to hike interest rates more aggressively this year, which has renewed demand for the greenback in recent months.

The kiwi increased to 95.34 Australian cents from 95.17 cents yesterday and rose to 4.8677 Chinese yuan from 4.8231 yuan. It was little changed at 81.59 yen from 81.68 yen yesterday and rose to 66.44 euro cents from 66.09 cents. The trade-weighted index advanced to 77.80 from 77.31 yesterday.