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Kiwi climbs vs pound with hung parliament

NZN 9/06/2017 Rebecca Howard

The New Zealand dollar rose against the British pound on Friday as markets awaited official election results out of the UK but with a hung parliament the likely outcome.

The kiwi jumped as high as 56.69 British pence immediately after the polls and was trading at 56.52 pence as at 5pm from 55.55 late Thursday. The NZ dollar was trading at US72.07c from 71.96c.

UK Prime Minister Theresa May had called the snap election to increase her slim majority and strengthen her position ahead of talks to leave the European Union, which begin later this month.

Instead, it is looking increasingly likely she may have to scramble to form a coalition government.

Westpac senior strategist Imre Speizer said markets have been largely quiet since the initial reaction that saw the pound tumble against most currencies.

"It looks like markets priced in a hung parliament in the first minute," he said.

The biggest problem for the UK is that it weakens their position on the eve of the Brexit talks, Mr Speizer said.

"If you have a strong party with a big majority they would have the backing of the people to negotiate hard and demand. With a weak majority or no majority at all the government's not in a great position to be bold about anything," he said.

Looking ahead, Mr Speizer said markets will now shift their focus to next week's Federal Reserve meeting as well as domestic data, including the balance of payments and gross domestic product.

A strong GDP reading could give the kiwi a further lift against the Australian dollar given the weak picture across the Tasman. The kiwi was trading at A95.64c from 95.36c.

It gained to 4.9004 Chinese yuan from 4.8912 yuan. It increased to 79.41 yen from 78.95 yen and was at 64.33 euro cents from 63.98 cents.

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