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Cameron comments help NZD past 70 US cents

NZ NewswireNZ Newswire 28/06/2016 Jonathan Underhill
UK Prime Minister David Cameron © Associated Press UK Prime Minister David Cameron

The New Zealand dollar rose back above 70 US cents after British Prime Minister David Cameron reiterated he would leave Brexit negotiations to his successor and won't invoke article 50 of the Lisbon Treaty that would begin the process for leaving the regional economic bloc.

The kiwi traded at 70.47 US cents as at 5pm in Wellington, having earlier fallen as low as 69.76 cents, from 70.65 cents on Monday. The local currency traded at 52.93 British pence, having touched a three-year high 53.67 pence overnight, from 52.72 pence.

Cameron told the British House of Commons that the UK won't trigger a formal exit from the European Union until a new PM takes over, having signalled he will be gone by October.

"Markets in Asia have picked up on the fact that Britain isn't going to sign article 50 until Cameron's replacement is chosen and so it is hard to see where the next piece of negative news is going to come from," said Martin Rudings, senior foreign exchange dealer at OMF.

Rudings said the kiwi may trade in a range of 69.70 US cents to 71.10 cents in the next 24 hours.

Traders are pricing in a 75 per cent chance that RBNZ governor Graeme Wheeler will cut the official cash rate a quarter point to 2 per cent in the monetary policy statement on Aug. 11.

The June monetary policy statement projected the Trade Weighted Average would average 72.6 in the second quarter, about 4.2 per cent below its current level.

Two-year swaps rose 4 basis points to 2.18 per cent today and 10-year swaps fell 1 basis point to 2.61 per cent.

The New Zealand dollar was little changed at 95.36 Australian cents from 95.32 cents on Monday. It fell to 63.68 euro cents from 64.14 cents and traded at 71.81 yen from 71.75 yen. The kiwi fell to 4.6844 yuan from 4.6902 yuan. The trade-weighted index dropped to 75.68 from 75.89.

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