The Australian and New Zealand dollars slumped against their U.S. counterpart on concern the European economy is stalling, reducing demand for currencies linked to global growth. The so-called Aussie weakened against 14 of its 16 major counterparts before German reports this week that are forecast to show declines for gauges of investor confidence and manufacturing in Europe’s largest economy. New Zealand’s dollar dropped versus the greenback for the first time in four days after European finance ministers failed to persuade investors they can avert a Greek default. “I’m bearish” on the Australian and New Zealand currencies, said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “The euro economy is weakening, clearly, and there’s a good chance that it will slide towards a recession again.” Australia’s dollar fell to $1.0253 as of 12:55 p.m. in Sydney from $1.0361 in New York on Sept. 16. It fetched 78.79 yen from 79.56. New Zealand’s currency, nicknamed the kiwi, slid to 82.39 U.S. cents from 82.91 cents. It bought 63.34 yen from 63.67. The Aussie may drop below $1 in the next few weeks, while the New Zealand dollar will decline to less than 80 U.S. cents, Speizer said. The MSCI Asia Pacific Index of shares dropped 1.2 percent, damping demand for higher-yielding currencies. European Outlook The ZEW Center for European Economic Research’s index of investor and analyst expectations for Germany retreated to minus 45 this month, the lowest since December 2008, according to economist estimates before the report tomorrow. A purchasing managers index for manufacturing dropped to 50.5 in September from 50.9 in August, a separate survey of economists showed before a report from Markit Economics on Sept. 22. German Finance Minister Wolfgang Schaeuble and Bundesbank President Jens Weidmann rejected using the European Central Bank to boost the euro-area rescue fund’s firepower, rebuffing a suggestion by U.S. Treasury Secretary Timothy Geithner. Europe’s finance chiefs, who wrapped up two days of talks in Wroclaw, Poland, on Sept. 17, also said that the 18-month debt crisis leaves no room for tax cuts or extra spending to spur an economy on the brink of stagnation. Australia’s currency was 0.2 percent from a one-month low against the New Zealand dollar amid speculation the bigger nation’s central bank will cut interest rates. RBA Minutes The Reserve Bank of Australia will release minutes from this month’s policy meeting tomorrow. The central bank left its cash target unchanged at 4.75 percent at the Sept. 6 gathering, saying global financial markets have been “very unsettled.” The benchmark rate is higher than all of the nation’s government bond yields. “If they touch on the possibility of an interest-rate cut,” the Aussie will be punished, said Westpac’s Speizer. Traders are betting that the RBA will lower its main rate by 147 basis points, or 1.47 percentage points, over the next 12 months, according to Credit Suisse AG indexes based on swaps. The Reserve Bank of New Zealand is predicted to raise its rate by 43 basis points over the same period, according to the indexes. The RBNZ cash rate is 2.5 percent. The Australian dollar slid 0.4 percent to NZ$1.2441 after touching NZ$1.2419 on Sept. 14, a level not seen since Aug. 15. Central bank rates in Australia and New Zealand are higher than developed-market peers such as the U.S. and Japan, where benchmarks are as low as zero, attracting investors to the South Pacific nations’ higher-yielding assets. To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net. To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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