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  • Oct 31, 2014
  • Updated: 9:28pm
BusinessEconomy

Deal decision raises pressure on weak aussie

PUBLISHED : Saturday, 30 November, 2013, 4:27am
UPDATED : Saturday, 30 November, 2013, 7:15am

The Australian 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 about investment flows into the country.

The currency depreciated at least 0.5 per cent against all 16 major peers since Reserve Bank of Australia governor Glenn Stevens said last week that he was "open-minded" about intervention.

The New Zealand dollar declined against the greenback after a report showed building permits fell in October for the first time in three months.

Australian Treasurer Joe Hockey rejected United States-based Archer Daniels Midland's planned A$3.4 billion (HK$24 billion) takeover of GrainCorp, ruling foreign control of the east coast's biggest crop handler was not in the national interest.

"The ADM decision added some pressure to a weakened aussie after Stevens recently referred to intervention," said Robert Rennie, global head of foreign-exchange and commodity strategy at Westpac Banking. "It's a concern when you consider the importance of foreign direct investment flows."

The Australian dollar has dropped 1.1 per cent since November 22, poised to match the longest losing streak since a seven-week slide that ended in February 1997.

Stevens put currency traders on notice when he said last week that while the benefits of intervention had not "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 per cent chance the RBA will reduce its benchmark rate from a record-low 2.5 per cent at its meeting on December 3.

Australia received a net A$57.6 billion in foreign direct investment for the year to June, compared with A$59.5 billion in portfolio flows, data from the Bureau of Statistics showed.

The New Zealand dollar held three days of declines after October building consents dropped 0.6 per cent. Economists had forecast an increase of 1.7 per cent.

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