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NZD dives v pound on UK snap election news

NZ Newswire logoNZ Newswire 18/04/2017 Paul McBeth
New Zealand coin is arranged for a photograph in Wellington, New Zealand © Mark Coote New Zealand coin is arranged for a photograph in Wellington, New Zealand

The New Zealand dollar has fallen to a seven-and-a-half-month low against the British pound after UK Prime Minister Theresa May called a snap election to seek a stronger mandate to negotiate her country's exit from the European Union.

The kiwi dropped as low as 54.53 pence, the lowest since September 1, and was trading at 54.80p at 8am on Wednesday in Wellington from 55.75p on Tuesday. It declined to 65.57 euro cents from 65.82c.

The British pound gained 2.3 per cent to $US1.2344 after Ms May called a general election for June 8, accusing opposition parties of threatening her administration's preparations for Brexit.

She had previously said she wouldn't go to the polls early but now says political opposition has hindered the exit and that a decisive victory would strengthen the government's negotiating position.

"Commentators see an early election as a positive move that will see May's government increase its majority, provide more negotiating power in Brexit talks and decrease the probability of an exit with no EU trade deal," BNZ currency strategist Jason Wong said in a note.

"In a market that has been significantly short GBP for some time, this announcement was a shock and no doubt the move higher reflects some short covering, which could continue in the weeks ahead."

Dairy prices rose at the latest GlobalDairyTrade auction, with whole milk powder prices, New Zealand's key export product, rising 3.5 per cent to $US2998 a tonne.

On Wednesday moring, the kiwi rose to US70.41 cents from US70.06c on Tuesday as the greenback fell against most major currencies in the shadow of the pound's ascendancy.

With hard commodity prices falling the kiwi rose to 93.10 Australian cents from A92.70c, gained to 4.8427 Chinese yuan from 4.8261 yuan and traded at 76.34 yen from 76.39 yen.

The trade-weighted index increased to 76.35 from 76.20.

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