Billiton transfers forex to Europe

BHP Billiton, which has a dual listing in London and Australia, said last week that its last forex trader in Melbourne is transferring to the Hague in the Netherlands in October.

The un-named trader will join one other forex trader within a larger treasury team in the Hague, where the firm's forex operation has been managed since the July 2001 merger of BHP, an Australian natural resources firm, and Billiton, a UK-listed metals and mining company. The company also retains one FX trader in Johannesburg, although all back office for foreign exchange is also based in the Hague.

A spokesperson for the firm said the move would have no impact on its existing relationship banks in Australia, which were all informed of the plans two weeks ago. "The only difference is that we will be predominantly dealing with their UK or European offices instead of Australia."

The bulk of Billiton's exposure is to movement in its reporting currency, the US dollar, to currencies in which the firm has expenses, such as the Australian dollar or South African rand, said the spokesperson. As such, specialist banks in these currencies in the UK and Europe are likely to be the main beneficiaries of the move.

Meanwhile forex managers in Australia downplayed the potential loss of business for them: "Geography poses few problems in markets these days, and most bankers can handle the issue of where their clients are based in their stride. There are plenty of more important reasons for being chosen to serve than where you happen to be headquartered," said one manager at a bank in Australia last week.

BHP Billiton's FX team focuses largely on spot trading – as it is a diverse company, it does not hedge the currency risk on its earnings, said the spokesperson. "While for any individual business, cashflows may be quite volatile as a result of changes in prices, exchange rates, markets and the level of demand for our commodities, our diverse portfolio of assets reduces this volatility to provide greater stability of overall cashflow," explained chairman Don Argus in his most recent review of financial year.

The only currency risk the company does hedge is where it has committed capital expenditure in a currency other than US$. "We would consider hedging that," said the spokesperson.

The last of some legacy hedges put in place by the former BHP, which reported its earnings in Australian dollars, ran off earlier this year, she added.

BHP Billiton's FX turnover is about $10 billion a year according to press reports in Australia, although this varies from year to year depending on factors such as prevailing exchange rates. The company has 35,000 employees in 20 countries around the world.

BHP Billiton is not the only company seeking to relocate from Australia. News Corporation, the global media and entertainment company with assets of $52 billion, is in the process of changing its domicile from Sydney to New York.