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NZ dollar rises on pound's weakness

NZ NewswireNZ Newswire 6/07/2016 Paul McBeth
pound coins © Getty Images pound coins

The New Zealand dollar climbed above 55 British pence as more UK commercial property funds suspended redemptions in the wake of the Brexit vote, stoking fears Britain could tip into recession.

The kiwi touched 55.32 pence, the highest level since April 2013, and was trading at 55.10 pence at 8am in Wellington from 54.78 pence on Wednesday. The trade-weighted index declined to 76.27 from 76.54.

The pound slumped to a new 31-year low against the greenback when three more British commercial real estate funds suspended withdrawals in response to a flurry of requests.

Six funds holding at least STG14.8 billion have been frozen, with commercial real estate showing a similar trajectory to the lead-up to the financial crisis almost a decade ago, and raising concerns the UK economy will fall into a recession. The UK's FTSA 100 fell 1.3 per cent.

"Six funds have now frozen redemptions, with clear risks of further contagion," BNZ's Kymberly Martin said.

The British pound is again the weakest performer over the past 24 hours."

The local currency edged lower against the greenback, trading at 71.30 US cents from 71.40 cents, after minutes to the Federal Reserve's last meeting reinforced expectations that US interest rates won't be rising any time soon.

That helped push up stocks on Wall Street, with the Standard & Poor's 500 index gaining 0.5 per cent.

Reserve Bank of New Zealand deputy governor Grant Spencer will speak on macroprudential policy and the country's housing market risk, which traders will got any guidance on new tools to slow rising property prices.

Prime Minister John Key this week said he'd support a move to introduce more tools, with rising prices seen as restraining governor Graeme Wheeler from cutting interest rates further.

The local currency fell to 94.84 Australian cents from 95.75 cents, declined to 72.28 yen from 72.61 yen, it slipped to 64.20 euro cents from 64.49 cents, and increased to 4.7720 Chinese yuan from 4.7674 yuan.

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