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Kiwi bounces vs pound as PM calls election

NZ Newswire logoNZ Newswire 19/04/2017 Paul McBeth

The New Zealand dollar bounced from a seven-and-a-half month low against the British pound on Wednesday after UK Prime Minister Theresa May called a snap election.

This was done in an effort to seize a stronger mandate to negotiate her nation's exit from the European Union.

The kiwi traded at 54.90 pence at 5pm in Wellington, recovering from as low as 54.53 pence though still down from 55.75 pence Tuesday. The Sterling's strength added to the downbeat sentiment around the greenback and the kiwi currency gained to US70.44c from 70.06c Tuesday.

The British pound jumped more than US3c after Ms May unexpectedly called a snap election for June 8, accusing opposition parties of threatening her administration's preparations for Brexit.

Ms May invoked Article 50 of the Lisbon Treaty to formally set in motion the UK's withdrawal from the regional bloc last month, kicking off a two-year exit process, after last year's referendum in favour of the move.

"It's a pretty smart move on her part to shore up a bit of support," said Mark Johnson, a senior dealer foreign exchange at OMF in Wellington.

The pound recently traded at US$1.2825, and Mr Johnson said "there's probably not much in the way of resistance now until US$1.30".

Mr Johnson said the kiwi will continue to get pushed around by geopolitical events that are currently supporting safe-haven assets such as the yen and gold. The kiwi traded at 76.49 yen from 76.39 yen.

Local data showed activity in New Zealand's service sector remained robust, while dairy prices increased at the latest GlobalDairyTrade auction.

The kiwi increased to A93.59c from 92.70c Tuesday and gained to 4.8470 Chinese yuan from 4.8261 yuan. It edged down to 65.69 euro cents from 65.82 cents.

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