The New Zealand and Australian dollars were hit hard after news that Singapore Telecommunications' offer for Cable and Wireless Optus would not result in big cashflows.
At 5.45 pm the kiwi traded at 40.75USc, 1US cent below its price at 9 am. The aussie was also sent down to 49.06c from 50.16c at 9 am.
The forex market's high initial expectations about the $A17.2 billion ($20.8 billion) deal led to disappointment and widespread selling for the rest of the day, one local dealer said.
"We opened up with a bid tone on the back of the stronger aussie dollar - stronger because of the SingTel deal that's gone through," the dealer said.
"The cash component of it wasn't as big as first thought, so they started to sell the aussie quite aggressively."
SingTel has made available a total cash and bond amount of $9.25 billion under the offer, of which the bond amount will not exceed $2 billion.
C&W Optus said the cash element of the consideration would be available to shareholders in Australian dollars or US dollars, based on a fixed exchange rate of $A1 to 49.4USc.
"Bearing in mind that in the last few weeks the aussie's been absolutely smashed, all it presented was a great opportunity for investment banks, importers, speculators, everyone, to sell the aussie. Even the short-term holders were getting out of it and it was just a snowball effect.
"There was selling interest from all over."
Profit taking on the kiwi-aussie cross pulled that back to 82.85Ac, from 83.23c at 9 am. "We got sold off against the aussie as well, even though it was getting trashed, so it was a very poor day for the kiwi all over really," the dealer said.
However, he said the kiwi was still a stronger prospect than the aussie at present.
- NZPA
<i>Currency:</i> Currencies punished on SingTel deal
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