The Australian and New Zealand dollars declined as concern the global economic recovery is slowing damped demand for higher-yielding assets. New Zealand’s currency dropped against all 16 major counterparts before a report forecast to show German business confidence fell to the lowest in more than a year. The so-called Aussie dollar snapped a three-day advance against the greenback as Asian stocks slid and a government report showed Australian second-quarter construction work shrank. “There’s concern that all this will signal the weakness ahead,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. The Aussie and kiwi “will be still vulnerable to the downside.” Australia’s dollar weakened to $1.0494 as of 1:58 p.m. in Sydney from $1.0526 yesterday in New York. The currency fell to 80.43 yen from 80.69 yen. New Zealand’s currency slid to 82.89 U.S. cents, erasing most of its 1.4 percent advance to 83.60 cents yesterday. The so-called kiwi dropped to 63.53 yen from 64.09 yen. The MSCI Asia Pacific Index declined 0.5 percent, reversing earlier gains of as much as 0.7 percent. Standard & Poor’s 500 Index futures expiring in September fell 0.7 percent after the gauge jumped 3.4 percent in New York yesterday. Business Confidence The Munich-based Ifo institute’s business climate index, based on a survey of 7,000 executives, will drop to a 13-month low of 111 in August from 112.9 in July, according to the median forecast of 37 economists in a Bloomberg News survey. Investor confidence plunged in Germany to the least since December 2008, the ZEW Center for European Economic Research in Mannheim said yesterday. The index of investor and analyst expectations fell to minus 37.6 from minus 15.1 last month. The Australian dollar maintained losses after reports showed a leading economic index for June fell and second-quarter construction work shrank. The New York-based Confidence Board’s index of Australia’s leading economic indicators lost 0.8 percent in June from a revised 0.2 percent slide in May. Construction work rose 0.7 percent in the second quarter, compared with the 1 percent forecast by 16 economists surveyed by Bloomberg News, the Australian Bureau of Statistics said. Aussie Positioning “Weaker Australian data is having some degree of impact in turning the tide in terms of positioning in the Aussie,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 29,723 on Aug. 16, compared with net longs of 29,016 a week earlier, figures from the Washington-based Commodity Futures Trading Commission show. New Zealand’s currency held on to declines against the dollar and yen even after the country posted a trade surplus July, the first in that month in 20 years. Exports exceeded imports by NZ$129 million ($106.9 million), from a revised NZ$197 million surplus in June, Statistics New Zealand said today in Wellington. The median estimate in a Bloomberg News survey of 10 economists was for a NZ$100 million deficit. The kiwi has weakened 4.1 percent in the past month, the worst performer alongside the Canadian dollar among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted indexes. The Aussie, the second-worst, has lost 3.2 percent. Australia’s benchmark 10-year yield declined four basis points to 4.35 percent. Yields on its three-year debt dropped to 3.68 percent from 3.72 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell one basis point to 3.33 percent. To contact the reporters on this story: Kristine Aquino in Singapore at Kaquino1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

Source