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Kiwi flies ahead of Brexit vote

NZ NewswireNZ Newswire 22/06/2016 Jonathan Underhill

The trade-weighted index of the New Zealand dollar has risen above 76 for the first time in 13 months ahead of the tight Brexit vote and lowered growth forecasts for the United States.

The TWI rose as high as 76.06 and was at 75.91 at 8am on Thursday in Wellington, from 75.87 late on Wednesday.

The New Zealand dollar climbed to US71.88 cents, a 12-month high, from US71.45c.

The kiwi edged up to 48.72 British pence from 48.64p amid reports some Britons were selling sterling for the euro and other currencies ahead of the vote.

The greenback fell after the International Monetary Fund cut its US growth forecast this year to 2.2 per cent from 2.4 per cent.

"Seemingly on a trajectory towards 72 US cents, the kiwi is flying again as relatively solid yields and more of a risk-on tone returns to markets," Sharon Zollner, senior economist at ANZ New Zealand, said in a note.

"But truly 'anything could happen'; over the next two days. If your business couldn't handle that, you might want to take cover."

The latest two polls put the 'leave' option, or Brexit, has slightly more support than Britain remaining in the European Union.

While financial markets have latched onto polls showing the vote is too close to call, bookies in the UK have the odds of remaining in the EU as a clear winner.

A leave vote would unsettle markets, raising the possibility of other defections from the regional economic bloc and potentially undermining the pound and the euro.

"Financial market participants are holding their collective breath," Zollner said. "With liquidity already lower and volatility higher, a leave vote, should it eventuate, would most certainly throw the cat bodily among the pigeons."

On Thursday morning, the kiwi fell to 95.36 Australian cents from A95.71c on Wednesday. It was little changed at 63.37 euro cents from 63.41c, rose to 74.74 yen from 74.61 yen and gained to 4.7090 yuan from 4.7022 yuan.

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