N.Z., Australia Dollars Drop on European Debt Crisis Concern, ECB’s Data

The New Zealand and Australian dollars dropped against their U.S. counterpart as concern increased that the euro region’s sovereign-debt crisis will damp demand for higher-yielding assets.

The South Pacific currencies fell, erasing earlier gains, after a report showed the European Central Bank’s balance sheet soared to a record after it lent regional banks more money last week to keep credit flowing. The currencies had gained earlier as stocks advanced.

“There’s zero liquidity in the market and there’s zero appetite for risk taking,” said Sebastien Galy, a senior foreign-exchange strategist at Societe Generale SA in London.

New Zealand’s dollar fell 0.6 percent to 76.79 U.S. cents at 11:40 a.m. in New York. It earlier gained as much as 0.7 percent. The kiwi weakened 0.5 percent to 59.89 yen, having reached 60.63 on Dec. 23, the highest level since Dec. 8.

The Australian dollar dropped 0.7 percent to $1.0085 after rising as much as 0.5 percent. It depreciated 0.6 percent to 78.66 yen.

The ECB’s balance sheet expanded to a record 2.73 trillion euros ($3.55 trillion). Lending to euro-area banks jumped 214 billion euros to 879 billion euros in the week ended Dec. 23, the Frankfurt-based ECB said in a statement today.

The balance sheet increased by 239 billion euros in the latest period and was 553 billion euros more than three months ago.

The MSCI World Index (MXWO) of equities fell 1.3 percent after earlier gaining as much as 0.2 percent.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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