By Candice Zachariahs July 29 (Bloomberg) -- The Australian dollar fell from near its strongest level this year after a U.S. report showing consumer confidence dropped more than expected damped demand for higher-yield assets. New Zealand’s currency was little changed. Australia’s dollar also ended three days of gains after prices declined yesterday for commodities such as oil and gold, which account for more than half the nation’s exports. The New Zealand dollar erased earlier losses after an industry report showed business confidence climbed to a 10-month high. “The Aussie has come a long way, breaking out of its recent ranges, and could ease a bit from these levels,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “There will be plenty of bumps on the road to world economic recovery and the Aussie will go along for the ride,” he said, using the currency’s nickname. Australia’s currency fell to 82.52 U.S. cents as of 2:19 p.m. in Sydney from 82.69 cents in New York yesterday, when it rose to 83.38 cents, the most since Sept. 29. The currency slipped 0.5 percent to 77.81 yen. New Zealand’s dollar traded at 65.80 U.S. cents from 65.78 cents yesterday, when it advanced to 66.34 cents, the strongest since Oct. 3. The currency fell to 62.05 yen from 62.19 yen. Australia’s dollar has risen 2.2 percent this month and 17 percent since the beginning of the year, while New Zealand’s currency climbed 1.8 percent in July and is up 13 percent in 2009. They are the third and fourth best-performers against the dollar of the 16 most-active currencies this year. Higher Yields Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. Demand for the Australian dollar weakened after the New York-based Conference Board said yesterday that confidence among U.S. consumers fell to 46.6 this month, a second consecutive decline, from 49.3 in June. The currency also declined as commodity prices dropped yesterday. Gold, oil and copper slid, taking the Reuters/Jefferies CRB index of 19 commodities down 0.9 percent. The New Zealand dollar erased earlier losses of as much as 0.5 percent after a report from ANZ National Bank Ltd. showed business confidence climbed this month. A net 12.6 percent of companies surveyed said they expected sales and profits to increase over the next 12 months from 8.3 percent in June, the report showed. The net figure subtracts the number of pessimists from the number of optimists. Bollard Comments Demand for New Zealand’s currency was limited before a central bank meeting tomorrow when economists expect Governor Alan Bollard to keep interest rates at a record low 2.5 percent. Bollard said on July 14 that the nation needed “the New Zealand dollar to be persistently weak over the coming years,” to encourage exports-oriented growth. “The RBNZ could attempt to verbally intervene to weaken the currency,” a team of Barclays Capital analysts led by Singapore-based David Forrester wrote in a note to clients today. “We continue to think that verbal interventions are chances to buy the New Zealand on dips, especially if the sentiment toward risk is positive.” Australian bonds rose for a second day. The yield on the benchmark 10-year note fell four basis points to 5.68 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.294, or A$2.94 per A$1,000 face amount, to 96.856. Australia today sold A$699 million ($577 million) of notes maturing June 2014 at a weighted average yield of 5.53 percent. The so-called bid-to-cover ratio at the auction was 3.4 times. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4 percent from 3.97 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

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