Demand for sterling slides, whilst demand for the kiwi soars

The pound reversed gains made on Monday, falling over two cents against the kiwi (0.9%), as the likelihood of an early rate rise in the UK was diminished.

• Sterling suffered yesterday as bearish sentiment toward the currency gained momentum after BoE governor Mervyn King said he would consider cutting rates on commercial banks’ reserves held at the central bank.
  
• Additionally, global economic optimism, driven by strong retail sales and producer prices in the US coupled with a positive statement from Fed chairman Bernanke, pushed up higher-yielding assets like the New Zealand dollar.
  
• The pound fell 1.1% against the kiwi, closing down at 2.3383, and the pound is fairing little better in trading this morning, having already fallen a further 0.7%.
  
• With little data of significance out in New Zealand this week, the kiwi will continue to be heavily influenced by rising risk appetite which could see the currency continue to strengthen.