Dollar touches week-high vs British pound, euro as Brexit formally triggered

The New Zealand dollar rose to a week-high against the British pound and euro after UK Prime Minister Theresa May officially triggered Britain's exit from the European Union.

The kiwi rose as high as 56.65 British pence and was trading at 56.51 pence as at 8am in Wellington from 56.44 pence yesterday. The local currency gained to 65.31 euro cents from 64.78 euro cents, having climbed as high as 65.43 cents.

The British pound slipped 0.1 percent and the euro fell 0.5 percent against the greenback after May invoked Article 50 of the Lisbon Treaty in a letter to the EU formally withdrawing from the regional bloc of nations, setting of the two-year exit process. Traders are watching European leaders' official reaction to Brexit, and German chancellor Angela Merkel has already rejected May's demand to run trade talks in parallel with the withdrawal, while European Council president Donald Tusk called for an orderly exit with a clear goal "to minimise the cost for EU citizens, businesses, and member states".

"There is an awful lot of hard bargaining and delicate negotiating ahead, but for the meantime, none of this is news with the GBP unsurprisingly taking it all in its stride," Bank of New Zealand economist Doug Steel said in a note. "There was some volatility overnight, but GBP seemed to derive some benefit from the tone of EU leaders such as EC President Donald Tusk who made calls for an 'orderly Brexit'."

Commodity currencies including the kiwi, Australian and Canadian dollars benefited from higher prices for raw materials with the Thompson Reuters/Core Commodity CRB index up 0.6 percent and Brent crude oil prices gaining 1.9 percent to US$52.32 a barrel as figures showed US stocks were smaller than expected. The local currency rose to 70.33 US cents from 70.07 cents.

The kiwi dollar was unchanged at 91.65 Australian cents and rose to 78.04 yen from 77.94 yen yesterday. It increased to 4.8422 Chinese yuan from 4.8286 yuan yesterday, while the trade-weighted index jumped to 77.17 from 75.95 yesterday.

(BusinessDesk)