The Australian dollar dropped to the lowest in three weeks against its U.S. counterpart as concern Greece may default prompted investors to sell higher- yielding assets. The New Zealand dollar also declined to a one-month low before German Chancellor Angela Merkel holds talks on the debt crisis with European Commission President Jose Manuel Barroso today. The so-called Aussie and kiwi fell for a third day as Asian stocks extended a global slump. Demand for Australia’s currency was also curbed after data showed the nation’s trade surplus narrowed in July by more than economists had forecast. “Unless there’s some major statements from the European authorities about resolving the debt situation, I think the euro, Aussie and kiwi will all fall this week,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest lender. Australia’s dollar touched $1.0324, the lowest since Aug. 19, before trading at $1.0333 at 4:36 p.m. in Sydney from $1.0470 in New York on Sept. 9. It dropped 2.1 percent to 79.60 yen after earlier sliding to 79.54, the lowest since Aug. 22. The kiwi declined to 81.54 U.S. cents from 82.21, after earlier falling to 81.41, the weakest since Aug. 11. It lost 1.5 percent to 62.81 yen. The Australian and New Zealand dollars may drop as much as 4 percent this week should the European situation deteriorate, Capurso said. The MSCI Asia Pacific Index of stocks fell 2.3 percent today after the MSCI World Index sank 3 percent on Sept. 9 and the Standard & Poor’s 500 Index of U.S. stocks lost 2.7 percent. Greek Default Risk Officials in Germany’s government are debating how to shore up the country’s banks in the event that Greece fails to meet the budget-cutting terms of its aid package and is unable to get a bailout-loan payment, three coalition officials said Sept. 9. The move capped a week of escalating German threats that Greece won’t get the money unless it meets fiscal targets. The German Chancellor is scheduled to discuss the crisis with the European Commission President in Berlin today. Australia’s exports exceeded imports by A$1.83 billion ($1.9 billion) in July, compared with a revised A$1.82 billion surplus in June, the Bureau of Statistics said today. The median estimate in a Bloomberg News survey of economists was for a surplus of A$1.9 billion. ‘Risk-Off Market’ “The trade balance was slightly below the mark, but the Aussie dollar was already falling ahead of that number,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “It’s a risk-off market today. It’s going to be very tough for the Aussie to outperform while all eyes are on European issues.” A Credit Suisse Group AG index based on swaps trading showed traders are betting the Reserve Bank of Australia will cut its benchmark interest rate by 141 basis points, or 1.41 percentage points, over the next 12 months. That compares with a reduction of 111 basis points projected on Sept. 1. The central bank’s cash rate is currently 4.75 percent. Yields on Australia’s three-year government bonds dropped 20 basis points to 3.48 percent. Ten-year yields fell 16 basis points to 4.11 percent. To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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