The local currency rose as high as 54.69 British pence, its highest level since December, and by 5pm in Wellington it traded at 54.64 from 54.22 at 8am and 53.60 late yesterday. The New Zealand dollar traded at 66.28 US cents from 66.30 at 8am.
The pound dropped to a two-and-a-half-year low against the greenback as investors see a growing chance of Britain leaving the European Union without an arrangement in place.
After meeting Johnson on Monday, Scottish First Minister Nicola Sturgeon said she believes Johnson is heading for a no-deal Brexit.
"Whatever Boris Johnson might be saying publicly about his preference being to strike a deal, in reality, he is really pursuing a no-deal Brexit because that is the logic of the hardline position that he has taken," Sturgeon was reported as saying.
"I think that is extremely dangerous for Scotland, indeed for the whole of the UK."
Johnson has refused to meet EU leaders unless they scrap the "backstop," part of the deal his predecessor Theresa May negotiated with the EU that would keep the Irish Republic and Northern Ireland borderless.
Johnson is still saying a deal is possible, although the EU is insisting May's deal is the only one available.
"The markets are coming closer to accepting that there will be a no-deal Brexit come October," says Peter Cavanaugh, the senior advisor at Bancorp Treasury Services.
That message has been reinforced by the British government preparing an advertising campaign to urge businesses to prepare for an abrupt departure from the EU.
Meanwhile, the Fed is expected to cut the federal funds rate by 25 basis points to a band of 2-2.5 per cent but US President Donald Trump has been tweeting that that's not large enough.
"The EU and China will further lower interest rates and pump money into their systems, making it much easier for their manufacturers to sell product," the president said on Twitter.
"In the meantime, and with very low inflation, our Fed does nothing - and probably will do very little by comparison. Too bad!"
Trump has repeatedly lashed out at the Fed, which is supposed to be independent of political pressure, and Cavanaugh said the market didn't react to his latest sally.
"He clearly doesn't care that the world holds him in considerable ridicule," he says.
The kiwi traded 96.02 Australian cents from 96.06 cents yesterday and was at 59.51 euro cents from 59.48 yesterday. It edged down to 71.97 yen form 72.11 yen yesterday and was at 4.5654 Chinese yuan from 4.5699 yuan. The trade-weighted index was steady at 72.97 points.
The New Zealand two-year swap rate eased to 1.2331 per cent from 1.2338 yesterday while the 10-year swap rate was unchanged at 1.6500.
