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NZ dollar down on Brexit impact fears

NZ NewswireNZ Newswire 5/07/2016 Paul McBeth
<span style="font-size:13px;">After the Bank of England highlights the risks facing the UK economy following the Brexit vote, the NZ dollar falls as investors seek safe haven assets.</span> © Bloomberg After the Bank of England highlights the risks facing the UK economy following the Brexit vote, the NZ dollar falls as investors seek safe haven assets.

The New Zealand dollar followed global stock markets and commodity prices lower as the Bank of England highlighted the EU exit as a key risk to the economy.

The kiwi fell to 71.40 US cents at 8am in Wellington from 71.97 cents on Tuesday. The trade-weighted index declined to 76.54 from 76.86.

The Bank of England's financial stability report warned the Brexit vote created a "challenging" outlook for the UK's economy and that some near-term risks have "begun to crystallise".

Separately, two UK real estate funds suspended redemptions due to the recent turmoil in financial markets.

That pushed down stock markets on both sides of the Atlantic and the Thompson Reuters/CoreCommodity CRB Index, a broad measure of commodity prices, dropped 2.4 per cent. Currencies sensitive to commodity price movements such as the kiwi and Australian dollar fell.

"Financial markets appear to have taken a more realistic view around the complexity and uncertainty characterising the global political background and associated impact on already lacklustre economic growth," ANZ's Con Williams said.

"With global growth concerns and USD/JPY strength back to the fore there could be some more downside for the NZD in short-term."

A decline in whole milk powder prices at the GlobalDairyTrade auction also weighed on the kiwi dollar.

The Bank of England's warning and the suspended redemptions from the real estate funds pushed down the British pound, with the kiwi gaining to 54.78 pence from 54.32 pence.

The kiwi was little changed at 95.75 Australian cents from 96.81 cents after the Reserve Bank of Australia kept the target cash rate at 1.75 per cent.

The local currency fell to 72.61 yen from 73.44 yen as Japan's currency benefited from investors chased so-called 'safe haven' assets, declined to 4.7674 Chinese yuan from 4.7981 yuan and dipped to 64.49 euro cents from 64.67 cents.

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