March 31 (Bloomberg) -- The New Zealand dollar fell after a report showed business confidence dropped to a 17-year low in March. The Australian dollar weakened as a decline in stocks prompted investors to sell higher-yielding currencies.

New Zealand's dollar is poised to snap three months of gains on speculation cooling economic growth will spur the Reserve Bank of New Zealand to lower interest rates. Australia's dollar is set for a monthly loss after Asian shares slid on concern global financial company earnings will decline.

``This morning's data add to the plethora of grim economic news out of New Zealand in early 2008 and are consistent with growth slowing very sharply,'' Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney, wrote in a research note today. The data are ``bearish the New Zealand dollar.''

The New Zealand dollar declined to 78.95 U.S. cents, the lowest in a week, before trading at 79.41 cents at 7:02 p.m. in Wellington from 79.88 cents late in New York on Feb. 29. It traded at 79.20 yen from 82.86 yen a month earlier.

The Australian dollar fell to 91.66 U.S. cents in Sydney, compared with 93.08 cents late in New York on Feb. 29. The currency traded at 91.41 yen from 96.55 yen a month ago.

A net 6.4 percent of New Zealand companies surveyed expect their sales will decline over the next year, the lowest reading since 1991, according to a report released by ANZ National Bank Ltd. in Wellington today. The net figure subtracts the number of pessimists from optimists.

Current-Account Deficit

New Zealand's dollar headed for a third monthly decline versus the yen as a report last week showed New Zealand's annual current-account shortfall was 7.9 percent of gross domestic product. A large deficit suggests a nation has to borrow more to meet its funding requirements, which have increased as investors flee credit markets, driving up the cost of debt.

``More upside for currencies with high current-account deficits looks limited,'' said Tony Allen, head of currency trading at ANZ National in Wellington. ``As the world struggles to fund itself, those countries with high deficits will struggle more.''

Benchmark interest rates are 8.25 percent in New Zealand and 7.25 percent in Australia, which compares with 2.25 percent in the U.S. New Zealand's currency headed for a second quarterly gain, climbing 3.6 percent. Australia's currency is poised for a quarterly advance, rising 4.7 percent.

Australia's dollar is set for a monthly loss versus the yen as investors shunned so-called carry trades, where funds are borrowed in countries with low interest rates and invested in economies offering higher returns. The risk is that currency market moves erase those profits.

`Risk Appetite'

The MSCI Asia-Pacific Index of regional stocks declined 1.8 percent today after the Standard & Poor's 500 Index fell 0.8 percent on March 28.

``We cannot rule out further downside probes in the Aussie if risk appetite continues to sour,'' said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore, in a research note today, referring to the currency by its nickname.

The Australian dollar is a favorite of carry trades because the central bank's benchmark interest-rate compares with 0.5 percent in Japan.

Australian government debt rose. The yield on the benchmark 10-year note fell 10 basis points, or 0.10 percentage point, to 6.05 percent. The price of the 5 1/4 percent bond maturing in March 2019 gained 0.765, or A$7.65 per A$1,000 face amount, to 93.628. Yields move inversely to prices.

New Zealand government bonds were mixed. The yield on the 6 percent note due December 2017 rose 1 basis point to 6.40 percent, according to data compiled by Bloomberg. The three-year yield fell 10 basis points to 6.42 percent.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.

Last Updated: March 31, 2008 02:26 EDT