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NZ dollar gains ahead of Brexit vote

NZ NewswireNZ Newswire 22/06/2016 Jonathan Underhill
© Reuters

The New Zealand dollar rose as polls showing there's a good chance Britain will vote to remain in the European Union this week helped restore risk appetite and underpinned equity markets, commodities and growth-linked currencies such as the kiwi and the Aussie dollar.

The kiwi rose to 71.45 US cents from 71.12 cents on Tuesday. The trade-weighted index rose to 75.87 from 75.40.

A Survation poll this week had support for remaining in the EU on 45 per cent to 44 per cent wanting to leave, and 11 per cent undecided. Support for remaining in the regional economic bloc has climbed and bookmakers Ladbrokes and Betfair have odds of a triumph for 'remain' voters at 73 per cent.

Staying in the EU could see risk sentiment climb on Friday after the vote closes at 10am NZ time, while a win for Brexit would see a surge in risk aversion, traders say.

The kiwi "is benefiting from a little bit of positive risk sentiment leading into the Brexit vote - stocks and oil were higher overnight as well," said Mitchell McIntyre, a senior corporate FX dealer at NZForex. "We've seen the polls in the UK shift from a 'leave' towards a 'remain'."

The kiwi didn't move much after government figures showed net inbound migration and tourism have held at record highs.

The kiwi rose to 95.71 Australian cents from 95.04 cents on Tuesday. The local currency gained to 63.41 euro cents from 62.72 cents on Tuesday after European Central Bank president Mario Draghi urged policymakers to push through economic reforms to support the eurozone's recovery, and that he was prepared to stabilise markets and provide liquidity if the UK voted to leave the EU.

The kiwi rose to 74.61 yen from 74.09 yen on Tuesday and gained to 4.7022 Chinese yuan from 4.6462 yuan.

New Zealand's two-year swap rate rose 2 basis point to 2.31 per cent and the 10-year swaps rose 4 basis points to 2.85 per cent.

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