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 snapped a three-day advance against the U.S. dollar as Asian stocks slid and a government report showed Australian second-quarter construction work failed to meet estimates. “There’s concern that all this will signal the weakness ahead,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. The South Pacific currencies “will be still vulnerable to the downside.” Australia’s dollar weakened to $1.0473 as of 5.10 p.m. in Sydney from $1.0526 yesterday in New York. The currency fell to 80.18 yen from 80.69 yen. New Zealand’s currency slid 0.9 percent to 82.86 U.S. cents from 83.60 cents yesterday. The so- called kiwi dropped 1 percent to 63.43 yen from 64.09 yen. The MSCI Asia Pacific Index declined 1 percent, reversing earlier gains of as much as 0.7 percent. Standard & Poor’s 500 Index futures expiring in September fell 1 percent after the U.S. stocks gauge jumped 3.4 percent in New York yesterday. Business Confidence The Munich-based Ifo institute’s business climate index, a measure of German confidence based on a survey of 7,000 executives, dropped to a 13-month low of 111 in August from 112.9 in July, according to the median estimate of 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 missed economists’ estimates. The New York-based Conference 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 in a Bloomberg survey of economists, the Australian Bureau of Statistics said. “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. N.Z. Trade Data New Zealand’s currency held on to declines against the dollar and yen as July trade figures released by Statistics New Zealand in Wellington showed imports and exports both dropped to their lowest levels since January. Imports fell 4 percent in July from a year earlier to NZ$3.59 billion ($2.98 billion), less than the NZ$3.9 billion forecast in a Bloomberg economists’ survey. Exports fell for a third month to NZ$3.72 billion, compared with an estimate of $3.85 billion. The country unexpectedly posted a trade surplus, the first for July in 20 years, with exports exceeding imports by NZ$129 million. The forecast was for a NZ$100 million deficit. “New Zealand’s July trade balance was better on a headline basis,” Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong, wrote in a report today. “But the details were weaker. Both exports and imports were softer than expected.” The kiwi has weakened 4.2 percent in the past month, the second-worst performer after the Canadian dollar among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted indexes. The Aussie, the third worst, has lost 3.5 percent. Australia’s benchmark 10-year yield declined three basis points to 4.36 percent. Yields on the country’s three-year debt dropped to 3.66 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