Aussie Set for Longest Drop Since 1997 After Takeover RejectedGarfield Reynolds
Australia’s dollar fell to a 2 1/2-month low, heading for its sixth weekly drop, after the government’s rejection of a planned foreign takeover raised concern investment flows into the country may weaken.
The Aussie depreciated at least 0.4 percent against all 16 major peers since RBA Governor Glenn Stevens said Nov. 21 he is “open-minded” about intervention. New Zealand’s kiwi dollar declined against its U.S. counterpart after a report showed building permits fell in October for the first time in three months. Australian Treasurer Joe Hockey rejected U.S.-based Archer-Daniels-Midland Co.’s planned A$2.2 billion ($2 billion) takeover of GrainCorp Ltd., ruling foreign control of the east coast’s biggest crop handler isn’t in the national interest.
“‘The ADM decision added some pressure to a weakened Aussie after Stevens recently referred to intervention,’’ Robert Rennie, global head of foreign-exchange and commodity strategy at Westpac Banking Corp. in Sydney, said after the takeover decision. ‘‘It’s a concern when you consider the importance of foreign direct investment flows.’’
The Australian dollar fell 0.1 percent to 90.95 U.S. cents as of 5:49 p.m. in Sydney from yesterday, after touching 90.56, the lowest since Sept. 4. It has dropped 1 percent since Nov. 22 in a sixth-straight drop, poised to match the longest losing streak since a seven-week slide that ended in February 1997. New Zealand’s dollar retreated 0.1 percent to 81.09 U.S. cents, down 1.1 percent on the week.
The Aussie has dropped 3.8 percent this month, the most among 16 major currencies after the yen.
The kiwi fell for a fourth day after statistics New Zealand said October building consents fell 0.6 percent. An increase of 1.7 percent was projected by economists in a Bloomberg News survey.
Australia’s funding arm said it will sell next week a new A$1.5 billion note maturing in October 2018, the nation’s biggest bond auction on record in data going back to 1983. Hockey is struggling to win parliament’s approval to raise the government’s A$300 billion debt ceiling to A$500 billion as weakening revenue drives the nation toward a deeper budget deficit.
‘‘The fiscal story is getting worse not better,” said Sally Auld, a Sydney-based interest rate strategist at JPMorgan Chase & Co. “One of the big stories for 2014 is that fiscal drag looks to be easing worldwide, while in Australia it’s going in the opposite direction.”
Australia’s 10-year government bond yields fell three basis points, or 0.03 percentage point, to 4.22 percent, paring their advance this month to 20 basis points. They reached a two-year high of 4.35 percent on Nov. 22.
Stevens put currency traders on notice when he said last week that, while the benefits of intervention haven’t “so far” outweighed the costs, it “doesn’t mean we will always eschew” currency sales. “In fact we remain open-minded on the issue,” he told a forum of economists to mark next month’s 30th anniversary of the free float of Australia’s exchange rate.
Traders see a 9 percent chance the RBA will reduce its benchmark rate from a record-low 2.5 percent at its meeting on Dec. 3, overnight-index swaps data show.
Twelve weeks after Tony Abbott’s election night declaration Australia was open for business, his treasurer blocked the GrainCorp takeover in the biggest rejection since Singapore Exchange Ltd.’s A$8.4 billion offer for ASX Ltd. was knocked back in 2011.
“Now is not the right time for a 100 percent foreign acquisition of this key Australian business,” Hockey said today in a statement after advice from the Foreign Investment Review Board. Australia received a net A$57.6 billion in foreign direct investment for the year ended June 30, compared with A$59.5 billion in portfolio flows, according to data from the Bureau of Statistics.