Reduced Brexit fears lift European, commodity currencies

Wed Jun 22, 2016 3:54pm EDT
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By Dion Rabouin

NEW YORK (Reuters) - The dollar was broadly weaker on Wednesday as risk appetite returned to markets, boosting higher-risk currencies, while sterling and the euro rose on the last day of campaigning before Britain's referendum on European Union membership.

A swing in bookmaker odds toward Britain choosing to remain in the EU, following the murder of a British lawmaker last week, helped boost currencies like the Australian and New Zealand dollars, considered riskier investments because of their ties to commodity prices.

The shift also helped sterling to recover 5 percent from lows around $1.40 last week.

"Part of it is gradually more and more the risk from Brexit being removed, something that started last week when we saw the polls changing around," said Charles St-Arnaud, senior strategist and economist at Nomura Securities International in London.

That bolstered the Australian and New Zealand dollar, St-Arnaud said, with the kiwi rising to its highest since June 11, 2015, and the Aussie touching its highest since May 3.

"Being the highest-paying currencies in the developed world, they’re gaining quite a bit," St-Arnaud said.

The Australian dollar AUD= was last up 0.75 percent against its U.S. counterpart to $0.7502. The New Zealand dollar NZD= gained 0.7 percent to $0.7166. Both Australia and New Zealand currently boast higher interest rates than the United States, making them attractive to investors.

Analysts also pointed to the low volume in markets, saying most investors preferred to stay on the sidelines ahead of Thursday's referendum.   Continued...

Arrangement of various world currencies including Chinese Yuan, US Dollar, Euro, British Pound, pictured in Warsaw, January 25, 2011 REUTERS/Kacper Pempel