Australia’s Currency Drops As Sydney Hostage Drama Continues

Three hostages escaped from a Sydney cafe where a man is holding people at gunpoint, as the more than six- hour standoff with armed police continues.

Television images showed three people, one wearing an apron, flee from the Lindt cafe in Martin Place before taking shelter behind a line of police officers clad in riot gear and wielding automatic weapons.

An undisclosed number of people are still being held and police are trying to establish the motive for the hostage- taking, New South Wales state Deputy Police Commissioner Catherine Burn told reporters. Networks earlier showed hostages pressed up against a window of the cafe, holding up a black flag with white Arabic lettering.

“As long as nobody gets hurt we want to resolve this peacefully,” Burn said, adding police negotiators have made contact with the gunman.

The hostage-taking brought much of Sydney’s central business district to a standstill today and saw the local currency fall, as the nation’s biggest banks closed branches in the city and the government delayed its mid-year economic outlook announcement. Prime Minister Tony Abbott, whose government raised Australia’s terrorism alert to the highest level in a decade in September, convened Cabinet’s National Security Committee and urged people to remain calm.

‘There’s a Holdup’

There were probably around 10 staff in the cafe when the gunman entered this morning, said Lindt Australia Chief Executive Officer Steve Loane, whose office is about one kilometer away.

“I was in our office, one of my staff walked in and said, ‘‘There’s a holdup at the cafe,’” Loane said by phone. Around 30 customers are typically in the premises at that time of the morning, he said.

Sai Chenepalle, 36, said he emerged from the Martin Place train station at about the time the incident took place. He saw two customers inside the cafe approach the door with their hands raised. He didn’t go in.

“It’s very scary,” he said, standing a couple of blocks away on Macquarie Street.

Australia and New Zealand Banking Group Ltd., National Australia Bank Ltd. and Commonwealth Bank of Australia said they closed all their branches in the city’s central business district. Westpac Banking Corp. also shut some branches.

U.S. Consulate Evacuated

The U.S. consulate in the MLC Center on Martin Place was evacuated. KPMG International locked down its downtown office on Shelley Street and told employees in other buildings in the city not to move, according to an internal memo seen by Bloomberg News.

“We don’t know whether this is politically motivated although obviously there are some indications that it could be,” Abbott told reporters.

Clive Williams, a former military intelligence officer, said the flag draped in the cafe’s window appeared to be a “Shahada,” which is used by some Islamic State followers though isn’t the group’s official insignia.

The “low-tech, high-impact operation is consistent with what Islamic State has been urging its supporters to do,” Williams, a visiting professor at the Australian National University’s College of Law, said in a phone interview.

The Australian dollar dropped to a four-year low of 82.05 U.S. cents after the news broke and traded at 82.39 cents as of 4:10 p.m. in Sydney. Ten-year government bonds rallied, sending the yield down as much as eight basis points to 2.82 per cent, a level unseen since July 2012.

Under Pressure

The unfolding siege “may help keep the Aussie under pressure,” said Janu Chan, a Sydney-based economist at St. George Bank Ltd. “News around the budget and declining commodity prices are also weighing on the Aussie.”

Macquarie Group said it’s relocating certain staff from its Martin Place building to other premises in Sydney and other employees will work from home. Tiffany & Co., Rolex and Jimmy Choo were among shops nearby that locked their doors.

Qantas Airways Ltd. flights were being diverted around the central business district, but still operating on schedule, the airline said on Twitter today. Shares in the country’s largest carrier fell 5.4 per cent at A$2.27 at the close in Sydney.

Authorities cited the threat posed by Islamic State when they raised the terrorism alert earlier this year. Days later police carried out their largest anti-terrorism raid, foiling an alleged plot to randomly abduct and behead a member of the public.

An 18-year-old man was shot and killed on Sept. 23 after wounding two counter-terrorism officers in Melbourne with a knife. He stabbed the officers in an unprovoked attack outside a police station, where he was due to be interviewed by police after waving an Islamic State flag inside a shopping center.