NZ dollar extends gains vs pound in Brexit stoush, may gain vs USD on growing 'short' positions
By Jonathan Underhill
July 10 (BusinessDesk) - The New Zealand dollar extended its gains against the pound on resignations from British PM
Theresa May's government and may advance against the US dollar in the face of increased bets against the kiwi currency.
The kiwi dollar rose to 51.70 British pence as at 5pm in Wellington from 51.42 pence late yesterday. The kiwi increased
to 68.45 US cents from 68.39 cents yesterday.
The British pound weakened after UK Foreign Secretary Boris Johnson became the latest minister to resign from Theresa
May's Conservative government over her Brexit plans. In a letter to May, published in the Guardian, Johnson said her
plan would see Britain become a "colony" of Europe and that the prospects of an open, outward-looking global economy
were fading. "That dream is dying, suffocated by needless self-doubt." His departure follows the resignation of former
Brexit minister David Davis and junior Brexit minister Steve Baker and undermines May's grip on power just nine months
out from the official date for Britain to leave the EU.
Much of the gains against the pound happened overnight and trading in Asia has been relatively subdued, said Tim
Kelleher, head of institutional foreign exchange sales at ASB Bank. He said speculative short positions (for the kiwi to
decline against the greenback) are the largest since 2004 based on futures market data "and it would be hard for the
kiwi to go a lot lower."
Short positions are bets that a currency will decline.
The New Zealand dollar didn't move much after figures showed retail spending on electronic cards rose across all
industries for the first time in seven months in June. Seasonally adjusted retail spending on credit and debit cards
rose 0.8 percent in June following a 0.6 percent lift in May, Stats New Zealand said. Core retail spending, which
excludes vehicle-related industries, rose 0.6 percent in June, matching the increase in May.
The kiwi traded at 4.5190 yuan, little changed from the start of the day and down from 4.5268 yuan late yesterday.
Figures today showed China's producer inflation rose a faster-than-expected 4.7 percent in June from a year earlier
while consumer prices rose 1.9 percent year-on-year, meeting forecasts.
The kiwi traded at 91.63 Australian cents from 91.65 cents yesterday. It rose to 76.07 yen from 75.52 yen and gained to
58.29 euro cents from 58.14 cents. The trade-weighted index traded at 72.85 from 72.78.
New Zealand's two-year swap rate rose 1 basis point to 2.18 percent and 10-year swaps were unchanged at 3.03 percent.
(BusinessDesk)