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Kiwi dips vs pound as May tries to govern

NZ Newswire logoNZ Newswire 12/06/2017

NZ dollar © Getty NZ dollar The New Zealand dollar fell against the pound on Monday, reversing earlier gains, as British Prime Minister Theresa May's Conservative Party prepares to form a minority government.

The kiwi dipped against the greenback as markets await the US Federal Reserve's rate decision and statement this week.

The kiwi traded at 56.40 British pence as at 5pm in Wellington versus 56.64 pence at the start of the day and from 56.54 pence in New York on Friday.

The local dollar jumped from 55.65 pence early on Friday in Wellington after the first British exit poll. The kiwi traded at US71.94c from 72.09c.

"It's (the kiwi) been caught in a very narrow trading range for the last three or four days. It's quite an indecisive market right now. There are a lot of cross-currents," said Sheldon Slabbert, a trader at CMC Markets.

He pointed to the geopolitical backdrop and the upcoming Fed meeting.

The pound fell sharply after no single party won a clear claim to power in the UK election late last week and Ms May is now struggling to unite her party to support her in Brexit talks - due to start June 19.

She is trying to strike a deal with a small Northern Irish party that will enable her to stay in power.

While the pound has steadied, Westpac Bank senior strategist Imre Speizer said the pound could be in for more weakness given the uncertainty surrounding the makeup of the government and its leadership.

Traders will be focused on New Zealand's domestic GDP data due Thursday.

The median in a Reuters poll of 11 economists is that GDP expanded 0.7 per cent in the three months ended March 31 for an annual pace of 2.7 per cent.

The kiwi traded at A95.58c from 95.67c on Friday in New York. It traded at 4.8898 yuan from 4.8979 yuan. It slipped to 79.31 yen from 79.54 yen last week and fell to 64.16 euro cents from 64.37 cents.

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