Australian Dollar Drop 11% in May

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
25 May, 2010
New York City

The Australian dollar slipped for the second day as investors sold high-yielding assets on concern debt crisis in Europe may escalate and tensions rise between the two Koreas. The dollar has so far dropped 11% in May after commodity prices slumped and equity market took a beating.

[R]6:00 PM Sydney, Australia – The benchmark index in Australia dropped nearly 3% tracking the losses in commodities and Asian markets. Rising tension in the Korean peninsula and mounting worries in the euro-zone dragged resource stocks to the lows for the year. At the close, the Australian dollar dropped to 11% decline in the month.[/R]

The Australian dollar slipped for the second day as investors sold high-yielding assets on concern debt crisis in Europe may escalate and tensions rise between the two Koreas. The dollar has so far dropped 11% in May after commodity prices slumped and equity market took a beating.

ASX 200 index in Australia decreased or 130.10 or 2.96% to 4,265.30 and of the stocks in S&P ASX 200 index, 10 increased, 188 declined and 2 were unchanged.

The Australian Office of Financial Management expects to invest A$150 million in residential mortgage-backed securities to be issued by Suncorp-Metway Ltd at an initial rate of 110 to 130 basis points more than the bank bill swap rate, according to a statement issued by the department.

The department has already invested about A$8.7 billion in 27 transactions under a program introduced during the financial crisis to stoke home-loan competition and the government will continue this policy even as the markets for bonds seems to have stabilized, the department noted in the statement.

The grain growing regions of southern Australia may receive below-average rainfall this winter, according to the Bureau of Meteorology. The outlook for the total rainfall over winter shows a moderate to strong shift in odds favoring a drier-than-normal season, said the department in its website today.

Australia’s winter season starts in June.

CP2, one of the bidders for the takeover offer made to Transurban Group, had sought interim orders from the Takeover Panel of the stock exchange to restrain Transurban from proceeding with its rights offer in the present form and prevent the issue and allotment of any shares on exercise of rights.

The panel rejected the request, said the Panel’s Director Allan Bulman over phone. The panel Director said the panel is yet to decide whether to grant final orders that would also stop the share sale.

The Sydney-based property developer, Lend Lease Group, will focus on its local developments for the next three years before seeking to expand its US operations, followed by Europe, said the company’s CEO Steve McCann while speaking at a property seminar in Sydney today.

Sigma Pharmaceuticals Ltd, Australia’s biggest drug distributor by market share, said in a statement yesterday it is considering the A$707 million or A$0.60 per share takeover offer made by Durban-based Aspen Pharmaceuticals Ltd.

The Australian company’s shares had slumped 52% in Sydney trading this year after it reported a full year loss of A$389 million in March this year.

ASX Movers

Gunns Limited led decliners in the S&P ASX 200 index with a loss of 24.2% followed by Linc Energy Ltd 9.6%, Macmahon Holdings Limited 9.3%, Atlas Iron Limited 8.7% and Murchison Metals Limited 8.5%.

St Barbara Limited led gainers in the S&P ASX 200 index with a rise of 3.3% followed by Flight Centre Limited 2.9%, GrainCorp Limited 2.8% and Tabcorp Holdings Limited 2.6%.

Other Movers

Australia and New Zealand Banking Group Limited fell 2.5% to A$21.34.

BHP Billiton plc fell 4.0% to A$36.28 after Rio Tinto plc and BHP Billiton Limited raised the stakes in the heated battle with the government over a planned new tax, warning the proposal had already damaged the nation''s reputation and accusing the government of misrepresentations.

Commonwealth Bank of Australia decreased 3.6% to A$50.31 after the subsidiary played a key role in the Australian bank’s operations, using Malta’s low-tax status to save millions in corporation tax.

Rio Tinto Limited fell 3.8% to A$61.70.

St Barbara Limited rose 3.3% to A$0.30.